Rebuilding Credit Scores After Bankruptcy

first step is to get your free online credit report with scores and see exactly where you stand.

Then take two important steps:

  • Pay every bill on time
  • Establish new credit

A first step in re-establishing credit is to get a credit card and begin using it well.

But, if credit cards are what caused your financial meltdown, first take a hard look at your attitudes toward spending.

If poor money habits were responsible for your bankruptcy, you need to create a budget. List all of your current obligations – such as the rent, the power bill, the insurance payment, etc. Then add a realistic figure for food and gasoline.

Next, get a calendar and write each item and amount on it’s due date. Now look at your income and when it comes to you. You’ll see that some weeks you have “excess” money and some weeks you may be a bit short. Earmark enough of that excess to cover the short weeks.

Budgeting so that you can pay every bill on time will go a long way toward rebuilding your credit scores, and the late fees you won’t pay will help build your bank account – so discipline yourself.

One of your budget items should be savings – so that you will have a cushion in case a paycheck is short due to a holiday or an illness.

Once you have two months’ salary saved, it’s safe to get a new credit card. But use it only for items you would buy anyway – or for emergencies such as the transmission going out when you have to have the car to get to work.

Credit cards should be considered a convenience, not a means to buy what you can’t afford /don’t really need. So, except in a case such as the transmission going out, use them only for items you know you can pay for when the bill arrives. Once you begin carrying a balance forward you’ll create a drain on your finances through interest, and it will become far too easy to let that balance grow.

Before you apply for any new card, do your research. You may have to settle for a secured card at this point, so look for one that pays interest on your security and offers the option to switch to unsecured once you’ve proven yourself to them.

Whether secured or unsecured, choose a credit card with an annual fee of $50 or less, and the lowest interest rate you can get. You won’t plan to carry a balance, but there’s always that darned transmission. Make sure the card doesn’t have application fees or transaction fees, and do choose one that will charge no interest when the bill is paid in full each month.

Once you’ve chosen a card you want, apply for only one. Multiple applications will harm your credit scores.

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Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.