Rebuilding Credit After Bankruptcy

Rebuilding credit after bankruptcy is like a winning a spouse's trust after an incident of infidelity: it takes time to build confidence in the relationship again. And it takes time for creditors to rebuild confidence in consumers who have violated promises to pay. Like an injured spouse, creditors need to see a consistent and faithful payment history to place trust in wayward consumers again. In a debt-deferred society, it's easy to get caught up in the habit of overspending. The lure of shopping malls and sumptuous merchandise is simply too hard to resist. And the knowledge that with one swipe of a little 2x3-inch piece of plastic, cardholders can have almost anything they want is simply mind-boggling. Not to mention the fact that most charge card companies only request minimal monthly payments. Countless consumers get seduced into charge card abuse every year and the road back to respectability can be long and arduous.

The best way of rebuilding credit after bankruptcy and cleaning up a blemished record is to re-establish a good payment history as quickly as possible. Consumers may choose to work with a money management consultant or find a good self-help book on debt reduction at the local library. Debt recovery gurus also recommend obtaining a secured charge card and making and paying for purchases on time. Similar in appearance to unsecured credit cards available after bankruptcy, a secured card is a major bank charge card. The difference is that a secured card is backed by the consumer's funds, which are regularly deposited into a savings account accessible to the card company. Monies are withdrawn from the consumer's savings as the card is swiped for purchases. The advantage of using a secured charge card is the consumer's spending limit is confined to cash available in savings, but can be increased as deposits are made. In addition, issuing companies monitor secured card activities the same way they monitor those of unsecured cards. Through regularly and consistently paying off secured charge card debt, individuals who have gone through consumer debt protection proceedings can begin re-establishing borrowing power.

Once a solid payment history is established with secured funds, most financial institutions will make unsecured credit cards available after bankruptcy to faithful consumers. Debtors shouldn't be surprised to see multiple offers from major card companies pouring in; the word spreads fast when former debtors begin to regain credibility. The Bible speaks about restoration as a reward for faithfulness. In Isaiah 57:18, God promised to restore Israel if they repented from idolatry -- "I have seen his ways, and will heal him: I will lead him also, and restore comforts unto him and to his mourners." Debtors who turn from charge card abuse and excessive spending place themselves in a position to reap the rewards of responsible financial management. Comforts they enjoyed prior to bankruptcy can be restored, as financial burdens are eventually lifted.

When lenders make unsecured credit cards available after bankruptcy, consumers should use moderation to avoid being tempted back into indebtedness. Just remembering the agony of overwhelming debt should be enough to bring an individual back to the realization that conservative consumerism is the best course to take. Consumer counseling agencies recommend establishing a good track record of timely, consistent payments over a minimum period of two years. They assert that lending institutions may extend loans to debtors who have filed Chapter 7, 11 and 13 bankruptcy petitions if financial reports indicate renewed faithfulness. Unsecured credit cards available after bankruptcy are a token of trust extended to responsible consumers.

Another method of rebuilding credit after bankruptcy is to purchase a vehicle at a "buy here, pay here" used car lot. Most of them do not penalize consumers for bad debts and bankruptcies. No, it's not a major auto dealership, and the interest rates may be higher, but individuals can use this type of financing to re-establish a sound car payment history. After bankruptcy, consumers should also ensure that current reports accurately reflect discharged accounts. Go online and obtain free reports and scores from the three major reporting bureaus and review them carefully. Contact them personally to ensure that any discrepancies, such as outdated filings and settled accounts are properly recorded. Timely payments with unsecured cards made available after bankruptcy also contribute to rebuilding positive credit histories. Rebuilding credit after bankruptcy sometimes requires "piggy-backing" off of someone else's good credit. Financial consultants recommend asking a family member or friend to co-sign on a small bank loan and paying it off as quickly as possible. But remember: co-signers are equally liable for unpaid bills; to avoid damaging a co-signer's solvency, faithfully honor loan committments. Financing furniture and appliances on a 90-day-same-as-cash basis also affords an opportunity to demonstrate trustworthiness. Store records will substantiate consistent payments and can be used to validate a former debtor's renewed reliability.

Once good credit has been re-established, take it easy. Consumers will have to take a good hard look at how they've managed money in the past and do away with poor practices before rebuilding credit after bankruptcy. Use unsecured credit cards available after bankruptcy sparingly. Instead of spending money irresponsibly, establish a budget and stick to it. Make entertainment a treat, instead of a routine and plan family nights at home with popcorn and rented videos, instead of going to a movie. Join a warehouse shopping club and buy larger quantities of food, meats and household items, re-packaging them for later use at huge savings. Join a Christmas club plan to save year round for holiday shopping and avoid overusing charge cards. Once credit-worthiness has been restored, be determined not to fall under the seductive spell of impulsive buying again.

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