One of the biggest misconceptions in the world of personal finance is that going through bankruptcy means that you will never have credit again. Anyone who has gone through Chapter 7 bankruptcy knows that creditors are sending out offers for credit even while the process is ongoing. Is it a good idea to take those high-risk credit companies up on their offer to help you rebuild your credit? You need to consider each offer separately when you are rebuilding credit, and take a path towards good credit that makes sense.
Take A Break For A Little While
In the immediate aftermath of your bankruptcy finalizing, it is best to take a break from credit for a while and just use cash. Your bankruptcy will remove all of your bad credit items, which will help to immediately stabilize your credit score. Spend about a year using cash and paying all of the bills you have left on time, and then you can look to rebuilding your credit after your financial situation has had time to settle down.
Buy Only Essentials
Bad credit auto loans are great ways to get started rebuilding your credit because they show that you can be financially responsible, and they are indicative of an essential purchase. One of the first types of creditors you will get letters from after your bankruptcy are companies offering car loans, and they are not a bad way to get your credit back on its feet.
Limited Credit Cards
When you feel you are ready to rebuild your credit, you can apply for special credit cards that either require you to have money in the account to spend it, or limit your credit access to only $500 at a time or less. You might not feel like you need to have a limited credit card, but rebuilding your credit using a special credit card shows that you take your credit and your spending seriously.
Rebuilding your credit after bankruptcy can be a very quick process, but there are many risks is trying to rebuild your credit too quickly. Rather than take those chances, you should go slowly and gradually build your credit back up to a score you can be proud of. By showing restraint in rebuilding your credit, you will show future creditors that you learned the lessons that bankruptcy had to teach.