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Establishing credit after bankruputcy

After you’ve had your debts discharged, it’s now time to get on with your life. Sure, your credit rating has taken a hit, but it wasn’t that good before the discharge. You will find it difficult to get a loan, and if you do get one, it will be at usurious rates. Nevertheless, there are actions you can take that will help you get your credit rating back on its feet. It will take some time though; in fact you can’t really start rebuilding until at least 12 months after discharge.

One thing you can do is make sure that the bill and debts you owe now are paid regularly and in full if possible. This means making sure your cellphone and electric are up to date, and paying down your student loan if circumstances permit. Also, paying your rent on time can help as well. Credit rating agencies are more and more including rental payment in credit analysis. Note however that most small and independent landlords are not in the system yet, only medium to larger corporations.

Secured credit cards are a great way to get your credit rating up. The premise is simple: you put money into a bank account and they float you credit on that amount. The amount is usually pretty small, in the $300 to $500 range, but the good thing is they report the credit to credit rating agencies, so you still get “credit” for making payments on time.

Look for unsecured credit, but proceed with caution. Department stores are often good places you can get a credit card even with bad debt. They do however come with high interest rates. This is not necessarily bad, if you do use it you should pay the balance off immediately. Again, the payments will be reported to credit agencies.

Periodically inspect your credit report for errors. Sure, your credit report is the last thing you want to see. But credit reporting agencies make mistakes and you can nip it in the bud if you get a free report from each of the three credit reporting agencies every year. This is particularly true right after the discharge. All balances should say zero.

Restoring your credit will be an ongoing project but don’t get discouraged. Remember, it make take at least two years before you start seeing your rating points increase. Within three years you may even be able to get a FHA mortgage.