Many people assume bankruptcy will ruin their credit. In reality, you can rebuild your credit score after bankruptcy through prudent financial planning. The first step is opening a checking account and savings account at a credit union or bank near you. Talking to your family and friends is a good way to learn about banks in your area and to see which one is best for your needs.
Get a Secured Credit Card
A secured credit card functions like a debit card. In order to use it, you have to pay the bank first (unlike traditional credit cards, which require payment after use.) When you use a secured credit card, payments are reported to the three major credit bureaus, which will help you to rebuild your score.
Many banks allow a $500 limit when you open a secured credit card for the first time. As you rebuild your credit, request a larger limit so you can put more money toward your card and improving your score.
Some banks may not allow you to open a secured credit card for one year after you filed for bankruptcy. If you are unable to get a secured card immediately, focus on building your savings account until you can request a secured credit card.
Get a Gas Credit Card or Retail Credit Card
After building your credit with a secured card, you can eventually move to an unsecured credit card. An unsecured credit card is a great way to continue building your credit score. Gas and retail credit cards are a good way to rebuild your score and earn rewards when you spend.
Keep these factors in mind when you’re looking for an unsecured credit card:
- Will all three credit bureaus receive notification of transactions with the card? If not, your credit might not benefit.
- Does the card require large set up fees? If so, try looking for a different option. Startup fees can negate its benefits.
- Don’t get a card at your favorite store; you might be tempted to overspend. You can avoid this by getting a gas card.
Avoid Keeping a Balance on Your Credit Card – Pay it Off Every Month
You’ve probably heard that keeping a balance on your credit card is a good way to build credit. This isn’t always true, especially if you filed for bankruptcy recently. Bankruptcy will influence your credit, so credit bureaus want to see you can avoid falling into debt by paying off the card at any time.
If you’re considering bankruptcy, get in touch with the Sherman Oaks bankruptcy lawyers from Wadhwani & Shanfeld today. We can help you understand your legal rights and options!