No matter the type of bankruptcy you’ve gone through, there is always a chance to rebuild and establish credit, especially after a bankruptcy discharge. Though it might feel like a monumental task to complete, it should be noted that by following a handful of credit building methods on a continual basis, you can actually establish credit in next to no time. The following will provide you with an in-depth look at what a bankruptcy discharge entails and the best methods of establishing credit after a bankruptcy discharge.
What Does Bankruptcy Discharge Entail?
A bankruptcy discharge is slightly different with all types of bankruptcy. That being said, there are some basic definitions that can be found with all types, more of which can be found here. In essence, a bankruptcy discharge is the point during the bankruptcy phase in which the debtor, which is you, is provided with an injunction that will stop the commencement of any collecting or recovering that is typically done in order to obtain any money you possibly have for the debts you owe. As such, a discharge provides the debtor with a veritable “clean slate” in which they no longer have to pay their debt and can instead begin to rebuild their credit and livelihood after having filed for bankruptcy.
It’s important to understand that a discharge can typically only be issued to a debtor once every eight years and won’t be issued for all types of debt. For instance, any possible student loans that have been received will not be discharged through this ruling, except in rare cases. The same holds true for any alimony or child support. You should also know that being provided with a discharge isn’t an extremely easy process. A court can choose to deny the discharge at any time if misconduct is suspected, or if certain assets that you still had were never disclosed during the initial bankruptcy process. That being said, if you have received a bankruptcy discharge, the first thing you are going to want to do is rebuild and establish your credit.
Best Methods of Establishing Credit After Bankruptcy Discharge
The first thing you should know about establishing credit after a bankruptcy discharge is that there is no quick fix. You can’t establish a credit score in a matter of days, no matter how much you try. However, credit can be established in a matter of months. As such, the following methods of establishing credit can prove beneficial towards doing so in a relatively timely manner. First of all, if you still have any existing loans after filing for bankruptcy, such as a house or car loan, make sure to pay special attention to these loans and pay every single one of your bills on time. It’s also wise to always pay at least a little more than the minimum payment due whenever you can. Over a few months, this will help you to build up a strong and useful payment history that will show up on your credit report and work wonders in helping you to establish a good amount of credit when the time comes.
The best way to ensure that you will be able to pay all of your bills on time and thus start building a strong credit report is by building a budget for yourself that is reasonable and won’t have you spending too much money on non-essential items. When creating a budget, always try to place your budget at a point that is below the money you make each month, which will help you in paying your bills on time and saving up should an emergency arise in the future, which you can find out more about here. View all of the upcoming payments that you do have as the most necessary thing on the budget you create, as missing even one payment can hurt your ability to establish credit after a bankruptcy discharge.
You should also consider applying as soon as possible after bankruptcy for a secured credit card. These cards are available to those that have gone through bankruptcy and are very similar to standard credit cards. In fact, they are essential for building credit in a matter of months instead of a longer period of time. These cards are special because of the fact that you will need to first deposit money in order to establish a line of credit. Make sure that the card you receive is one that utilizes reports from all three national credit bureaus every month to establish credit quickly. As mentioned previously, make sure that all of your payments with this card are paid on time each month, as the payments history aspect of your credit report accounts for 35 percent of your credit score. These percentages are displayed in further detail here. To ensure that your debt on this card never gets too out of hand, use it as little as possible and pay off all or most of the balance you have each month.
Eventually, you need to sign up for a standard credit card. Those that go through bankruptcy will typically start to receive credit card offers after 6 months or more have passed since the filing. Don’t just accept and sign up for any card, do so for the one with the best interest rate available, so that your debt never spirals out of control again. That being said, paying off your balance each month will keep that from becoming a problem in the first place. A credit card will slowly help you to build and establish a good credit rating. However, make sure not to sign up for more than three cards in a six month span, as this will adversely affect your credit rating. Also pay attention to any costs associated with the card before signing up. By utilizing each of these methods for establishing credit after a bankruptcy discharge, you will be back to having a great credit score in no time.