Life After Bankruptcy - How to Reestablish Credit

Contrary to what most people believe, filing bankruptcy is not the end of the world. Yes, it can be a bit of a financial setback, but there is life after bankruptcy. Post-bankruptcy life may mean having to negotiate a little harder, pay higher interest rates for a period of time and adhere tightly to a budget, but it will all be worth it in the end.

For people who have filed for bankruptcy and are looking to re-establish credit to buy something major like a car, do not begin shopping until the bankruptcy is discharged. Most reputable lending institutions will not lend money to anyone if the bankruptcy is not discharged.

In the meanwhile, here are a few things to do to help rebuild credit.

• Get a secured credit card. This works for a person who has filed bankruptcy just as well as it does for a person trying to establish credit. A secured card is a credit card in which the card holder places a collateral deposit with the credit card company. The credit card limit is equal to the amount of collateral.
• Pay everything on time. This is very important. Since the debts have been discharged by the bankruptcy, the remaining monthly living expenses should not be difficult to maintain. This is the beginning of a whole new credit history. This is where people who have filed for bankruptcy can prove to potential creditors that they are credit worthy and that the lending intuition will not be making a mistake in lending them money.
• Credit report tracking. People who have filed bankruptcy should be proactive and review their credit report annually (more often would be better). It is not uncommon to find errors on credit reports. Be diligent and correct any and all errors. It could be the difference between being approved or declined for a loan. Go to AnnualCreditReport.com to request a free credit report annually.
• Adapt a new financial philosophy. Pay cash. If the cash is not available to pay for a particular item, the item remains in the store. Many people get into trouble with debt as a result of purchasing items on credit. Credit card companies love this, but if gone unchecked, credit card debt can ruin the cardholders' financial future.
• Refinance loans after a year. For those who are able to secure a loan right after bankruptcy, it is recommended to refinance the loans a year after bankruptcy. The further in the past the bankruptcy discharge, the more attractive the interest rate becomes. Review loan interest options annually. This option is only recommended to those who have a track record of making timely payments on all of their currently outstanding debts.

With the right financial philosophy, proper planning and careful spending, anyone can rebuild their credit and prove that there is life after bankruptcy.