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How to Rebuild Your Credit After a Bankruptcy

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Rebuilding your credit after hitting bankruptcy can feel like a humungous task. But, if you play your cards right, have a good plan, and are determined, then you can do it without much issue. One of the major hurdles people often feel is being mentally kicked down. 

The first thing you should pay attention to is to get your spirits high and prepare yourself mentally for this seemingly daunting task.

Getting help from your family or friends can help you give the much-needed boost. The detailed bankruptcy guide on 24Cash talks about how to bounce back and build your credit after bankruptcy – from understanding to learning to getting help.

Let’s talk about the important steps you need to take to get your finances in order.

Make Sure Your Credit Report Actually Reflects Bankruptcy 

For some people, it might seem taboo or uncomfortable to reflect their bankruptcy status on their credit score, but in fact, it is much better than having an outstanding balance. 

It might be very helpful to send your bankruptcy discharge copy to all the agencies in case they report any of the discharged debts as active. Your credit report should show a $0 balance for any discharged accounts through bankruptcy. 

Have a Stable Employment 

Having a stable job can ensure lenders about your financial security and, in turn, improve your credit score. Taking up permanent employment can be a big step towards financial and credit score rebuild. 

Avoid job hopping in general, but especially after bankruptcy, you want your lenders to trust your discipline. Constant job changes might not go down very well with your lenders as it shows instability. 

Grow Your Savings 

It is a big step in the right direction to start putting aside more money in your savings. Not only will this lead to financial stability, but it also shows positive signs of financial management to your lenders. 

You can start by putting aside a percentage of your monthly earnings into a savings account. The consistency of this activity is more important than the enormity of the amount. 

Maintain Regularity of Your Non-Bankruptcy Accounts

Contrary to popular belief, not all your accounts will be included in your bankruptcy. You should regularly pay all of your active accounts, which are not discharged by bankruptcy. Student loans are infamous for not being discharged under bankruptcy.

Moreover, accounts that aren’t on your credit score should not be ignored as they still can be reported if you fall behind.

Be Selective With Your Credit Applications

This might be an obvious strategy, but unfortunately, not many follow it. After bankruptcy, you may want to limit the number of credit applications you apply for, as there is a high chance of not being successful at any of them, given your credit history. 

Try to apply for one product at a time, as further unsuccessful credit applications might hurt your credit score even more. Ideally, you should try to repair your credit score before you apply for any new applications.

Keep Your Overall Balance Low

The key to a good credit score is to keep the balances low. Your balance reflects how much credit you charge on your card. It is always best to keep your credit to 10-30% of your credit limit and especially after a bankruptcy. 

Final Thoughts

Bankruptcy is not the end of the world, while it may seem like it. It’s just another hurdle that you need to cross. Pull your pants up and get to work, and you will be fine.

Getting Business Finance With a Poor Credit History

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If you’ve previously suffered from adverse credit, then it can be difficult to raise additional finance for your business through a bank. The good news is that there are options available to you that could allow you to get access to the funds quickly and with a minimal amount of fuss.

There are a lot of different routes available when it comes to getting funding for your small business, so don’t panic if the bank has said no due to your credit history. The business loan market continues to grow and more and more lenders are beginning to understand and take steps to meet the need for poor credit business loans. After all, a few financial mistakes in the past shouldn’t affect your ability to start a business in the future. So, what are your options? Here are some choices that you might want to consider.

Unsecured Business Loans:

Unsecured business loans only used to be available from big banks, but that has all changed these days with a wide range of specialist lenders, such as peer to peer lenders, entering the market. As long as the loan is considered affordable, an unsecured loan can be arranged for most businesses – regardless of credit rating.

Asset Finance:

Asset finance is an ideal option for companies that have a large number of assets in their name but are struggling for capital. Asset finance can be used to raise funds against current assets or to purchase new ones. Since the asset is taken as security for the loan, bad credit is usually more likely to be considered here as the risk is lower for the lender, which increases the chance of the application being accepted.

Invoice Finance:

Invoice finance is another popular option used by businesses with a poor credit history. If the business is currently owed a lot of money via invoices at any one time, there’s a high chance that they will quality for invoice finance. Once this type of finance is arranged, the lender will release a high percentage of any acceptable invoice issued as soon as it’s raised, helping to ease business cash flow.

Merchant Cash Advance:

This is an ideal option for businesses that take large amounts of money through a card terminal. It allows you to raise money quickly and the lender is repaid easily by automatically taking a set percentage off each future sale.

Will I Pay More Due to Adverse Credit?

Getting approved for a line of credit is possible even when your credit score isn’t great but bear in mind that it will often come at a slightly higher rate in comparison to a business with a strong credit history. How much will depend on a number of factors including the type of product chosen and the security that is offered to the lender.  Unsecured loans offer little security and, therefore, tend to have increased rates, while other options such as asset finance tend to be cheaper due to a high level of security offered to the lender.

Which of these options is best for your business?

Five Myths about Credit Reports

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Credit reports can be overwhelming and may be ignored if you are unsure which habits are good or bad.  There are myths that are associated with credit that are actually false.

Closing Credit Cards Will Improve My Score

Some think that just because you paid off an account that it should be closed, but this will actually hurt you as it decreases your total available credit.  The best thing you can do is cut up the card, never use, and keep the account open, proving you do not spend your max capacity.

Opening a New Credit Account Will Kill My Credit Score

If you are opening many accounts, yes they will lower your score a few times for each lender that is reviewing your credit account, but if you are being responsible, the short-term score dropping a few points will actually help in the long run as your credit availability will increase as will your score.

Too Many Credit Checks Will Lower My Score

As long as you are checking your own credit your score will not be impacted, as these are called “soft pulls”.  Having lenders check your credit while taking an application for a home, auto, or credit card purpose will lower your score a few points each time, so make sure that if you are getting approved for something, you will go through with it, and do not open up too many credit accounts. Though it is possible to learn how to remove credit inquiries from lowering your score.

My Income or Bank Account Impacts My Score

Although your employment history may be reported on your credit report, typically your salary will not, and for sure will not impact your credit score, as well as the amount of money in the bank.  Credit scores factor in payment history, debt, and inquiries, so there is no need to worry, at least about the income and asset piece.
Bad Credit is here for Good

Well although it may seem like forever until your score goes from “poor” to “excellent”, bad credit is not forever.  Sure it may take years to improve your score, but with responsible payment history, removing debt, and not living beyond your means, you will see your score steadily rise quickly.  Late payments significantly lower scores so any days of being over 30 days late need to be gone, and watch your credit balance versus your availability because scores factor in your spending reaching its max.

Why I use My Credit Card for Everything

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It would be fun to rack up your credit card bill and go on a shopping spree, but that’s not what I’m advising.  As long as you are responsible and pay off your balance each month, it can actually make smart financial sense to use your credit card for everything.

Rewards Program

I use my Costco American Express credit card for everything.  At 3% back for the Costco gas stations (make sure to check the Costco gas hours first), 2% back at restaurants, 2% on travel purchases, and 1% on other purchases, not the cashback from purchases from Costco, that’s a lot of money you’re throwing away.  Add in paying your electric, gas, and cable bills with your credit card you imagine how much each month you’ll rack up in rewards dollars, let alone over the course of a year.  Don’t believe, take a look at what you currently spend each month on bills and spending money and do the math!

Your Credit Score is Important

Whether you’re just starting out and have no credit, or you’re looking to continue to build your credit due to mismanagement in the past, using your credit card responsibly by paying off the full balance each month will actually help your credit.  A solid payment history is reported to credit bureau’s each month, whereas a debit card does not show on your credit report.

Convenience

Whether it’s making a big money purchase, or simply do not want to carry cash around, credit cards are more universally accepted than even debit cards.  Ever try to check into a hotel or rent a car with your credit card, a hold is placed on your checking account for incidentals, and that hold is even higher when using a debit card.  Why tie up the money from your bank account when you can use your credit card and the hold will come off in a couple days from your credit account, which can take twice as long to come off with a debit card.  Not to mention the rewards you’re getting by purchasing with your credit card…see…

If you find yourself enjoying the seemingly endless credit limit and are spending too much each month and cannot pay the full balance when it’s due, then perhaps going back to a budget with your debit card works better for you.  If you’re disciplined though, and want to earn hundreds of extra dollars every couple months just by spending what you normally spend each month, but this time using your credit card, you can enjoy those rewards checks!

Get Your Free Credit Score Now!

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Almost 50% of Americans have now used a free credit score company to get their credit score in the last 12 months, and 14% have done so in the last 3 years, even though some studies have shown that Americans aren’t exactly up to snuff when it comes to their credit.

A recent survey from Bankrate Money Pulse shows that Americans are finally taking a little bit more interest in their credit because of the fact that they can get their credit score for free. That’s quite a bit different from an American Banker’s Association study in 2013 that found almost 60% of US consumers had no idea what their credit score actually was.

The big difference? The fact that consumers can now get their credit report, and find out their credit standing, for free. Bruce McClary, the vice president of public relations and external affairs with the National Foundation for Credit Counseling, states that credit scores have become “far more accessible than they ever have been,”, and one of the main reasons for that is that consumers can now get their credit score at no cost.

In fact, over 40% of Americans recently surveyed said that their latest credit score was on their credit card statement, while another 15% used a credit score simulator online for free. 13% of consumers surveyed said that they had purchased their credit score from one of the three major credit reporting bureaus.

One of the big reasons that it’s now much easier to get a free credit score is because of the Consumer Financial Protection Bureau and an initiative that they launched in early 2014 call the “free credit score initiative”. This initiative was the key to encouraging most of America’s big financial institutions to provide consumers with their 3 digit credit score at on cost and, since starting, many of the nation’s biggest banks have also begun to provide them for free as well.

It was recently announced by FICO, one of the biggest credit scoring companies in the country, that they would also provide free versions of their credit score, a huge win for financially strapped consumers.

Still, the fact is that many Americans still completely ignore their credit and credit score until it gets out of hand. In fact, over a quarter of Americans have never checked their credit score and 35% have never checked to see their credit report to see if there were any errors or signs of fraud like identity theft.

Point being, now that it’s relatively easy to get your credit score, and get it absolutely free, there’s no reason to not get it and check to make sure that everything is correct, as well as that your score is as high as it can be.

In fact, experts recommend getting it 3 times a year, staggering your requests across the various credit reporting bureaus as you go.