Bankruptcy takes a toll on your financial life for years after you file, especially when it comes to your credit score. However, you don’t have to wait all those years to start putting your credit back together. The sooner you can show that you’ve learned from the bankruptcy and can manage credit more effectively, the sooner you’ll start to see your credit score rise again. Here are some tips to keep in mind as you begin to use credit again after bankruptcy.
Ease Back Into Credit Cards as an Authorized User
In the credit card world, an authorized user is someone who has permission to use a card but is not responsible for paying the bill. If you have a family member who has a good credit history, you can ask them to add you as an authorized user to the account. As long as payments are on time, your credit history improves along with that of the account owner. You don’t even have to use the card or have it in your possession. Just be careful who you choose; if the card owner doesn’t manage the account responsibly, your score takes a hit as well.
Consider a Credit Builder Loan to Get Reestablished
A credit builder loan does precisely what the name suggests. It helps you build your credit by taking out a secured loan against the money you already have and paying it back to yourself over time. For example, let’s say you have $1,000 in a saving account. You could take out a credit builder loan for $1,000, which is a low risk for the bank since you have enough in your account to cover it. As you pay it back over time, your credit score improves.
Rejoin the World of Credit Cards With a Secured Account
Over time, as you manage your finances carefully and responsibly, your score will rebound enough that you can apply for a credit card again. Initially, you will probably start with a secured card. Similar to the credit builder loans, a secured card has a credit limit equal to the deposit you can put down. For example, if you put up $1,000 to secure the account, your card limit will be $1,000. The fees and interest rates are higher on secured cards, but they can be a useful way to help rebuild your credit.
Though it may seem counterintuitive to think about getting a credit card when you’ve just filed for bankruptcy, the best way to rebuild your financial reputation is to demonstrate your responsible handling of money. If you need help getting started, a knowledgeable and experienced lawyer, like a bankruptcy attorney, is an excellent resource. Contact one in your area to figure out your next steps.