Debt is something many Americans have to deal with, so if you’re trying to find a way past to become more financially stable, you are not alone. You might decide to look at the best way to consolidate credit card debt. Perhaps it makes more sense for you to get a second job or find one that offers a better salary than what you are currently making.
If none of those seem viable for you, declaring bankruptcy is also an option. You might regard this as a temporary setback, but there is no reason why you can’t recover from it relatively rapidly. Let’s look at four ways to quickly rebuild your credit post-bankruptcy.
1. Monitor Your Credit Score Carefully
Declaring bankruptcy does cause your credit score to take a big hit. A dip of 100-200 points is the average, but it might even be more than that on certain occasions.
After you’ve taken this step, monitor your credit score on a month-to-month basis. Do this by signing up for a free account via one of the available online services. Signing up for an account through which you can keep an eye on your score does not impact it negatively.
Look at what your score is before you declare bankruptcy and afterward. As you gradually start to rebuild, check on it every few weeks, at a minimum. Watch for any sharp decreases that could signal fraudulent activity. Another big hit might mean someone is trying to open a bank account or take out a loan in your name.
In addition to making sure there is nothing suspicious going on, monitoring your account post-bankruptcy is a way to motivate yourself. You should feel good about your progress as your score gradually goes up again.
2. Learn and Utilize Responsible Financial Habits
In the time after you declare bankruptcy, you should learn to avoid the behaviors that led you into such dire financial straits. Making consistent, on-time payments is one way to begin the fragile rebuilding process. Your payment history accounts for a large chunk of your FICO score, so paying off utilities and other bills on time will help you.
You should also use your credit card sparingly and make sure to pay off the balance every month. If possible, you can start to save up an emergency fund. If it helps, you can deposit part of your paycheck into that fund automatically every month. It might come in handy if your car breaks down or you get hit with some sudden medical bills.
3. Consider Getting a Secured Credit Card
Getting a secured credit card makes sense post-bankruptcy as well. A secured card is one that requires a refundable security deposit. Then, you borrow against that deposit.
Doing this means you will begin to seem more trustworthy again in a lender’s eyes. These cards come with higher interest rates than unsecured ones. However, as long as you pay back the balance each month, that will not be an issue.
4. Look for a Co-Signer
Maybe you are looking for a rental agreement or loan post-bankruptcy. If so, finding a co-signer like a relative who trusts and believes in you will be your best move. A co-signer pays back the bulk of the loan should the primary borrower be unable to do so.
Finding a co-signer helps because it’s a way for you to get that loan or rental agreement you need, but it can also make you feel a lot more confident. It’s an effective signal to any entities that might lend you money or let you move into a house or apartment that someone has your back and believes in you.
Rebuilding Post-Bankruptcy is Always Possible
Bankruptcy isn’t a pleasant experience, but there are lessons you can take from it that should help you for the remainder of your life. The slow rebuilding of your credit should allow you to reflect on your financial goals and the most realistic ways to attain them.