Reconstructing Credit Following Bankruptcy

Reconstructing Credit Following Bankruptcy "Insolvency provides debtors with a clean slate and a second opportunity to manage their finances. Nonetheless, it comes at a cost. Insolvency degrades a debtor's credit report and makes it difficult to obtain respectable credit at a reasonable interest rate. A bankruptcy remains on a credit report for ten years, allowing creditors to limit credit or charge these individuals higher interest rates. Even though there are obstacles to obtaining credit after bankruptcy, these obstacles can be surmounted by improving one's credit score.After filing for bankruptcy, the first step is to confirm that all discharged debts have been closed with the credit bureaus. In some instances, discharged debts that have been reported to credit bureaus remain open and continue to harm a person's credit score after bankruptcy. The next stage is to begin reestablishing credit. That can only be accomplished through the use of credit. After filing for bankruptcy, the individual must begin using credit responsibly, which includes always paying bills on time and utilizing a limited quantity of available credit.However, obtaining credit after bankruptcy may be difficult. A secured credit card may be an alternative. Secured credit cards are issued by banks in exchange for a deposit of X dollars, which serves as collateral for the credit limit on the card. Even though these cards typically have a low credit limit, they should not be utilized to the maximum. Utilizing more than 30 percent of the available credit on these cards will improve the credit score, whereas using the maximum available credit will lower it. The credit card balance should be paid in full each month; it is not necessary to carry over payments from month to month in order to enhance your credit score.Although obtaining a secured credit card may be a viable option, it must be chosen with caution. The credit card should not have an application fee, nor should the annual fee be excessive. The credit card must also report to the credit bureaus (Equifax, Experian, and TransUnion). If the credit card does not report to the credit bureaus, there is no means to improve the credit score. After 12 to 18 months of using the secured credit card, there should be an option for an unsecured credit card.
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