3 Tips on Getting Back on Track Financially After Bankruptcy

After your bankruptcy has been completed, you enjoy freedom from many of the debts that haunted you before you filed bankruptcy. However, your credit score likely took a hit because of the bankruptcy. Fortunately, it is in your power to rebuild your credit, if you stay financially responsible. Here are some tips to help improve your credit score and prevent the financial problems that required you to file bankruptcy in the first place from reoccurring.

1. Use a credit card wisely

It is a commonly held misconception that credit card companies and lenders will "blacklist" you if you have filed bankruptcy. On the contrary, they will likely find that you are in a better financial position now than you were before bankruptcy, as you are no longer tied to your pre-bankruptcy debt.

One of the fastest ways of rebuilding your credit score is to get a credit card and use it responsibly. Since you will likely receive many questionable offers from credit card companies that come with high interest rates, it is generally better to get a secured credit card. With this type of card, you need to put a deposit down first. You can then charge a certain percentage against that deposit. This will ensure that your spending does not go out of control. If you pay off the balance in full each month, your credit score will increase over time. Before you know it, you can switch to a traditional credit card with lower interest rates.

2. Start a savings account

Most bankruptcies come because of an unexpected event, such as a medical need, job loss or divorce. It can also happen when you are hit with too many smaller and unexpected expenses. To deal with your financial liabilities, you may have had to turn to credit cards, payday loan companies or other predatory lending schemes whose high interest rates ultimately caused your debt to spiral out of control.

To avoid these surprises, it is vital to establish a savings account and contribute to it regularly. Even if you can only save a small portion of your paycheck, it can lead to a substantial financial cushion over time. Make sure that you do not touch the money once it is in the savings account, unless it is absolutely necessary.

3. Beware of credit repair companies

As a bankruptcy filer, many companies may try to take advantage of your situation. Some companies market "credit repair services" that do nothing more than you could do on your own. It is important to realize that there is no shortcut to raising your credit score and no way to magically "erase" bankruptcy from your record. Instead of using these services, spend wisely, pay your bills in full each month, and periodically review your credit score from the three major credit reporting bureaus. Be sure to correct any errors on your credit report, as they can unfairly hurt your credit score.

Although a setback, bankruptcy is not the end of your financial opportunities in life. With hard work, your credit score can return to respectable levels in as few as 1-2 years. Because of this fact, if you are struggling with debt, you should not let a fear of destroying your credit score prevent you from getting the help you need. An experienced bankruptcy attorney can answer your questions and recommend the best way to address your debt problems.