It’s the same story every time. Your bankruptcy has been discharged, and you can now start planning for the future. You find that not only has filed for bankruptcy affected your finances, but it has also greatly damaged your credit score. This isn’t news to most people but sadly, there’s not a lot you can do to stop these impacts. Have no fear; rebuilding your credit score after bankruptcy is possible, and should be a priority for those who are eager to get their finances back on track. Here are a few tips to rebuild your credit quickly:
Check your credit report
How can you know how much work you need to do to improve your credit if you don’t know where it stands? Check your credit report to ensure all of the information on it is correct. If you find errors, dispute them to make sure you are in the best possible position to start rebuilding your credit. The major credit reference agencies offer free credit report checking services online.
Create a budget
The best way to rebuild your credit is to make sure you pay all debts and bills on time. To ensure that you stay on top of this, create a budget. Calculate the amount of disposable income you have each month by working out the total amount you must spend on necessities, bills, and debts. Subtract this amount from your total income. If you don’t have any disposable income, or if the amount is minimal, you should go through your bank statements and find areas where you can make spending cuts. You should also consider any opportunities that could increase your income.
Create a savings account
Ideally, you should have a minimum of 5-10% of your monthly income allocated to your savings. Research from the Urban Institute showed how having a savings cushion of just £180 for unexpected expenses protected families from resorting to payday loans and running up credit cards. This helped them avoid starting a new debt spiral. Having savings can help rebuild your credit by ensuring you pay bills and debts on time in the face of unexpected expenditures.
Apply for credit
Six months after your bankruptcy has been discharged, and providing that you have been able to make all of your payments, it is sensible to apply for credit again. This may seem counterproductive because the last thing you think you need is more debt. But your credit score is a measure of your ability to pay off debt. Without doing so, you can’t efficiently improve your score. Your poor credit score after bankruptcy will make it more difficult to be accepted for lines of credit. But there are credit providers who specialise in helping people rebuild credit scores. These providers are less likely to reject you, which is important if you were recently bankrupt. The key to building your credit rating using credit cards, overdrafts or loans, is being 100% certain you can pay off your debts in full and on time. Until you know you can do this, it is best to focus on building your income and reducing expenses while paying off existing debts on time.
The number of insolvencies has increased by a fifth in England and Wales, but filing for bankruptcy doesn’t mean you can’t look forward to enjoying the benefits of good credit in the future. These tips will help you build your credit as quickly as possible, putting your life back on track. If you’re dealing with insolvency or having money troubles, call us today on 0800 2545122to see how we can help you.
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About the author
Gerald Irwin
Gerald Irwin is founder and director of Sutton Coldfield-based licensed insolvency practitioners and business advisers, Irwin Insolvency. He specialises in corporate recovery, insolvency, rescue and turnaround.
