Bankruptcy is a legal status in which an individual is unable to pay his debts. You can always build your credit back even after being bankrupt. Read on to know the best way to build credit after bankruptcy.
Hang on until the bankruptcy has been discharged because unless and until the bankruptcy is been discharged, you cannot build back your credits. In the middle of a bankruptcy procedure, no one will be willing to extend a credit for you.
Start by acquiring a secured credit card, which is a collateralized credit card. It is as if you are making an initial deposit with the financial institution. The deposit that you made will become the limit for the secured card that you acquired. The advantage is that you have acquired a credit card at your disposal and the usage is reported to the credit reporting agencies, which provides a more organized credit profile. The disadvantage is that you will have to pay a high interest to use the money that you have deposited.
Try to maintain the available credit ratio to a low outstanding. This will be a warning so that your credit card does not reach its limits. The credit agencies will have a close look into how you use your credit. A red flag is raised when there is a high balance on your credit cards, no matter if it is secured or not. It is natural to look at a person with persistent high credit as a one who finds it tough to manage debts. Your credit score will be tough to maintain if you have high credit card limit along with a recent bankruptcy.
Have a habit of tracking your credit report. The website AnnualCreditReport.com can get you a free copy of the credit card report each year. It is also advisable if you can review your credit annually so that you can get to know how you are maintaining your credits.
Take the time off to apply for a credit. Wait before you apply for additional credits for about six to nine months. It will be evident that you have not learnt from your mistake that lead to bankruptcy if you submit too many applications at the same time. Taking it very slow will help you a lot in rebuilding your credits after bankruptcy procedure. Hence, it is important to wait until the right time to apply for credit, which is the best way to build credit.