You’re thinking about filing bankruptcy. You know that you need a fresh start. You know you’re never going to pay off all this debt. You have some income, but not enough.
The only thing holding you back is this persistent fear that you’re never going to get a loan again. You’ll never have a line of credit. You’ll never buy a house. You’ll never even get another credit card, making it so much harder to shop online and in stores.
You can rebuild your credit
If that’s your fear, stop buying into the myth that says your credit is shot for good after bankruptcy, that you’ll be 100 percent ineligible for any and all loans. That’s not how it works. You can get credit cards, and you can get them almost immediately. You can also rebuild your credit score with time and healthy financial habits.
Wondering how you’ll get started after bankruptcy? Here is one example:
- Discharge your debt. This lowers or perhaps eliminates your liabilities. Now you can pay off new debt, and lenders can see that.
- Get a secured credit card. You’ll need some money up front, but you can get the card. You may also want to consider prepaid cards, though some believe secured cards are a better option.
- Forget about the top-line cards for now. You don’t need to think about low interest rates and airline miles and everything else. You’re not going to get those cards. That’s all right. Don’t let it hold you back.
- Use the secured card to make purchases. Pay off the balance when it’s due, every time it’s due. When the company then reports your financial activity to the credit bureaus, your score will begin to improve.
- Live within your means. This means never spending more than you make. It’s the key to the whole thing, ensuring you can pay that card off every month.
Over time, your score will go back up, even during that initial 10 years when the bankruptcy is on your record. You can start small and rebuild your credit. Eventually, you’ll qualify for other loans and lines of credit, which you can then use to rebuild it even more.
What are secured cards?
Secured cards, unlike more traditional credit cards, are backed by a financial deposit. Your credit line may start out at the level of that deposit — $500, for instance — but could slowly increase as you prove you can pay it off. Lenders are more willing to give you these cards due to the deposit, allowing you to prove you’re a reliable borrower.
As you look into all of your bankruptcy options and legal rights, make sure you never buy into the myths. There are a lot of them out there, but you can see that they don’t paint an accurate picture.