In the first part of this topic, we discussed developing good financial practices to help you rebuild your credit. If you haven’t already read that post, we strongly recommend that you review it before reading this one - the steps discussed in this post won’t do you much good if you haven’t yet gotten your financial house in order. Good financial habits are a necessity when it comes to rebuilding your credit after bankruptcy.
Kain & Scott is a Minnesota bankruptcy firm, and we pride ourselves on helping our clients before, during, and after their bankruptcy cases. In this post, we’ll be discussing some additional ways to rebuild your credit.
Review Your Credit Report
The first thing you want to do is review your credit report for any inaccurate information. If there are errors on your credit report, you want to dispute them and get them corrected. This can be a bit of a challenge, but a Minnesota bankruptcy lawyer can help you through the process.
However, keep in mind that your credit report will contain negative information, including your bankruptcy. Although your bankruptcy wiped out your debts, it will be included on your credit report for several years. Chapter 13 bankruptcy will be deleted after seven years, while a Chapter 7 bankruptcy will remain on your credit report for ten years. Don’t get discouraged, though - a bankruptcy on your credit report isn’t as harmful as you might think.
Monitor your Credit Score
In order to effectively rebuild your credit, you want to keep a close eye on your credit score and check it regularly. You want to make sure you use one of the free services, but use the same one every time so that you can monitor your progress. Over time, you should see steady progress. If you see a sudden drop, you know that something isn’t right and should investigate further.
Monitoring your credit score can also serve as a helpful reminder to practice good financial habits. Success breeds success - seeing your credit score improve can help keep you motivated.
Consider Taking on Some Debt
This may seem like bad advice, but it’s an important step - albeit one you should take very carefully. Once you’ve created a budget and are confident that you can stay on track, it’s time to start thinking about ways to create a positive payment history. Staying on top of your bills is a good start, but potential creditors will want to see that you have the financial ability and good habits to repay your loans. The following are some options for options that allow you take on some debt safely.
Secured Credit Cards
Secured credit cards are a good option to build a positive payment history and rebuild your credit. In order to obtain a secured credit card, you have to pay a deposit, which then becomes your credit limit. You will have to pay an annual fee and higher interest rates, but the goal here is to build a better credit record so that you can qualify for a better card down the road. Plan on paying off the balance every month in order to avoid additional damage to your credit.
Retail Credit Cards
Retail credit cards are another good option for rebuilding your credit. Retailers typical have less stringent standards when it comes to credit and therefore higher approval rates for their credit cards. Gas credit cards are a great way to go - you have to put gas in your car to go to work, and you don’t have to worry about being tempted to overspend at your favorite retailers.
Get a Co-Signer
No one wants to have a co-signer, but it’s a great way to qualify for a loan or a credit card you possibly couldn’t otherwise get. Since your co-signer is also liable for the account, it’s also a great way to stay accountable and make sure you stay on top of your payments.
Your bank or credit union may be willing to make you a secured personal loan, one of the very best ways to rebuild your credit. Secured loans come in two basic types:
- A loan where you borrow against cash you have on deposit;
- A loan where the bank advances you funds without cash upfront, but release those funds to you only after you have made the requisite payments.
Neither of those options may sound much like a loan, but the point is that it looks like a loan when reported to the credit bureaus and is a very good way to rebuild a positive payment history without taking on significant debt.
A Minnesota bankruptcy attorney can review these options with you and help you decide which one is best for you. They have the experience and knowledge to help you make the right choice.
Kain & Scott - Minnesota Bankruptcy Attorneys
We’ve been helping Minnesotans get through the bankruptcy process for decades, but our representation doesn’t end there. We provide our clients with the resources and guidance to rebuild their credit and make the most of their bankruptcy discharge. If you’d like to discuss how we can help you, call us at 800-551-3292 or fill out our online contact form in order to schedule a free consultation with one of our attorneys.