Bankruptcy has an unfortunate reputation. While it’s intended as a fresh start, a way for businesses and individuals to wipe the slate clean and rebuild their finances after unfortunate circumstances, too many people view bankruptcy as the end. While bankruptcy obviously has consequences, it is possible for both businesses and individuals to turn their fortunes around in the wake of bankruptcy. Just as the President who has been declared bankrupt no less than four times.
For many of us, our finances are much easier to rebuild when we can access favorable credit. One may think that this is all but impossible after bankruptcy but rebuilding your credit score is easier than you may think. While a bankruptcy stays on your credit record for 10 years, the severity of its impact does fade over time. The trick is in boxing clever and begin restoring your credit right from the offset.
If you’re already in the process of filing for bankruptcy (or are about to), it’s important to ensure that your interests are protected. Bankruptcy lawyers will help you to secure the best possible result and negotiate terms of repayment and the liquidation of your assets on your behalf. This will help to lay the foundation for getting your credit back in order.
Avoid available credit as much as possible
While some credit may be available to you immediately after bankruptcy, it’s usually exactly the kind of credit you can do without. Payday loans and high-interest credit cards often have cripplingly high repayments that you could saddle you with a debt that could easily spiral out of control.
Create a budget
Poor budgeting and over reliance on credit is one of the main reasons people file for bankruptcy in the first place. Creating a budget for your personal and / or business finances and sticking to it is one of the most important steps one can make in restoring their credit. Though this may be easier said than done, there is ample support available through credit counselling agencies. It’s also important to incorporate an emergency fund into your budget so that you can weather any possible storms on the horizon for which you would previously have turned to credit.
Plan your strategy
With your budget in place, you can now look at ways to make yourself more appealing to the creditors who will be able to help you turn things around. Keep an eye on your credit with free annual credit reports, and free credit score check services. Ensure that any repayments you’re making under the terms of your insolvency are showing as on-time as perceived late payments can slow the recovery of your credit rating.
Look for the right product
As important as it is to avoid the financial products that will pull you deeper into debt, it’s important to strive for the products that will improve your financial well being. These will be easier to acquire of you can provide extra assurances to creditors that you’re not a lending risk. As such, ideal products include:
- Secured loans
- Secured credit cards
- Co-signed credit cards and loans
- Authorized user status
By ensuring that your credit score is improving and by offering extra assurances, you’ll be astonished how quickly the acquisition of good credit will come to you.