How to Build Up Credit After Bankruptcy

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How to Build Up Credit After Bankruptcy
By Tidbits ., eHow Member

Build up Credit
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It is possible to build up credit after bankruptcy. Many individuals do not want to file bankruptcy for fear of never being able to secure credit. What they must understand is there is a better chance of rebuilding credit after bankruptcy than there is of remaining thousands of dollars in debt without a clear plan to get out. With proper planning, self control and patience, anyone can rebuild credit after bankruptcy.

Difficulty: Moderate
Instructions

Step 1
Wait until the bankruptcy is discharged. You cannot start to rebuild credit until after your bankruptcy is discharged. No one is willing to extend credit to anyone in the middle of a bankruptcy procedure.

Step 2
Obtain a secured credit card. A secured credit card is a collateralized credit card. In other words, you make an initial deposit with the financial institution. That deposit becomes the limit for your secured credit card. The upside is that you have a credit card at your disposal and your usage is reported to the credit reporting agencies, thus creating a new and improved credit profile. The downside is that you must pay a rather high interest to use your own money.

Step
3
Maintain a low outstanding to available credit ratio. This is a warning not to run your credit cards to the limit. Credit reporting agencies look at how you handle credit. Having high balances on your credit cards, whether they’re secured or not, raises a red flag. They look at individuals with consistently high credit card balances as someone who is having a difficult time managing debt. High credit card limits along with a recent bankruptcy is looked upon unfavorably and the credit score suffers.

Step 4
Track your credit report. Through the website AnnualCreditReport.com you can get a free copy of your credit report each year. It’s in your best interest to review your credit annually.

Step 5
Apply for new credit slowly. Wait six to nine months before applying for additional credit. Submitting too many applications for new credit after a bankruptcy sends the message that you haven’t learned from your mistakes. Taking it slow goes a long way to help rebuild your credit after a bankruptcy.

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