Rebuilding Credit After Bankruptcy: Your Ultimate Guide

Are you having trouble getting approved for that midnight blue, 2018 Honda Civic? Been saving up for years to put that down payment on your dream home, but can't seem to qualify for the loan? You're not alone. Bad credit haunts the lives of millions of hard-working Americans like yourself.

Did you know, between auto loans, credit cards, student loans, and mortgages, the average US household debt is $279,469, according to USA Today. If you're like many Americans then you have thought about, or have already, filed bankruptcy. You may have even given up on rebuilding your credit score. Fear not, here are a few tips for rebuilding your credit after filing bankruptcy.

Rebuilding Your Credit After Bankruptcy

Let's get a few things out of the way. Coming back from the depths of bankruptcy is not an overnight process. It takes A LOT of time and patience. Did you know that there is more than one way to file for bankruptcy? Do you remember which one you filed? Make sure you know the differences between chapter 7 and chapter 13. Mixing these two can be detrimental for your case.

The goal here is to rebuild a clean reputation with creditors. As you already know it can take a long time to gain someone's trust.

You may be asking yourself, "how can I get them to trust me?" The answer is simple, dear friend. Consistency. This is the key to any credit score, no matter how good or bad. They need to know that you are reliable, and can return what you borrowed. You wouldn't loan your friend $2,000 if you knew he wasn't going to pay it back, would you?

Know Your Rights; Know Your Report

While it may not seem like creditors want you to know this, you definitely have rights to your credit score. The less you know, the easier it is for them to bully you into a bad situation.

You have the right to a free copy of your credit report. Requesting a copy of your report online is fast and easy.

Now that you know you have the right to a free copy of your score, study it! Notice how many hard inquiries you have, and any accounts you may have in collections. See something wrong? Dispute it! Once you are on top of your score, you can stay on top.

You have the right to know if your credit was denied, and why. Have you ever felt as though your credit was denied due to your race, religion, or even age? You may have been a victim of discrimination.

The Equal Credit Opportunity Act (ECOA) protects you against discriminatory profiling. If you're worried that this may have been the reason for your denial, remember that you have a right to know why they denied you.

You have the right to peace from debt collectors. Under the Fair Debt Collection Practices Act, debt collectors MUST stop contacting you if you ask them to. It's that simple. Just write the collection agency a cease and desist letter and no further communication is permitted.

Open A New Line of Credit

Right, this is the problem you started with. No one wants to loan you any credit, but you've got to start somewhere. The key is to start small.

Try opening a savings secured loan. This is essentially a loan through your bank to prove your trustworthiness. Here's how it works: The bank holds a set amount of money from your savings account and allows you to borrow against your own money. This is a no-risk "loan" that many banks offer to anyone with new or poor credit.

Beware of loans that guarantee approval. While it is another option to build credit, it's a tricky one. The interest rates on these loans are likely to be extremely high. Once you've fallen into a high-interest loan, it can be hard to escape. Be wary, or you could end up in the same situation you started in.

Be Cautious

Misconceptions. Misconceptions everywhere. With all the scam artists out there it's hard to tell what's fact or fiction.

Operating off of misinformation can be a fatal game. For example: ever heard that the bigger your debt is the worse your credit is? This is misleading. The reality is that no one is looking at how much you owe, rather your debt to income ratio. Lenders want you to borrow money because that's how they turn a profit. They are looking for reassurance that you're going to pay it back. The higher your debt to income ratio, the less likely creditors think you are to pay it back.

Take some time to inform yourself of some other common misconceptions floating around the web.

Dispute It

When in doubt, dispute it. As mentioned earlier, if you see something on your report that doesn't seem right, don't be afraid to say something.

There are approximately 327 million people in America, and each of them has a credit score. Mistakes happen, and that's why you have the right to dispute anything on your credit score.

Disputing is easy. Prefer the mail-in, paper option? It can be done. Too busy for the US postal system? There's even an app for you! Credit Karma is a free app that allows you to dispute anything that doesn't seem quite right.

No matter your preferred method of contact, it's definitely worth reaching out. Try not to dispute too many things, as this can be counter-intuitive and end up hurting your credit. Make sure that you are only disputing information if it's inaccurate.

Now, What?

Rebuilding your credit after bankruptcy is a long journey, but it's not impossible. Managing a healthy credit score is no easy feat, and it, unfortunately, is a burden we must all bare.

These tips are just the beginning of your training. Remember, it's okay to feel overwhelmed. It's okay to have questions. Our expert support team is here to help you along the way. Contact us for all of your confusing credit needs.