Deciding to declare bankruptcy is never an easy choice to make, but there are times when it really is the best solution. It offers you relief from your debts and an opportunity for a new beginning financially.
But this will only happen if you decide to immediately begin to rebuild good credit, which can be a long and difficult if you don’t understand the process. You already know that lenders are now less likely to extend you credit, so now the question is how to begin to reestablish good credit.
The first step is basically to learn about credit scores and what your current credit score is. The range for a credit score is 300 to 850 and 680 or above is considered a good score and will get you the best rates for loans.
You also need to know that your credit score will drop as much as 100 points after a bankruptcy, even if you had a good score before your bankruptcy it will now be much lower. Using a few tips, you can improve your credit score and learn about getting a loan without a job after bankruptcy.
Getting Started on the Path to Good Credit Again
Finding that first lender to offer you a loan or credit card after a bankruptcy can be a challenge but it is not impossible. Starting with a secured credit card is a smart choice to quickly begin credit repair. A secured credit card requires you to deposit a specific amount of money with the issuer and then that is your credit limit. You can then use the card and make payments as you would on any other credit card.
As you build a history of regularly using the card and paying the bill on time, you will find that your credit limit is being raised. Normally after 12-18 months of on time regular payments, the account is then converted to an unsecured account.
The absolute most important key to this process being successful, like title loans with no car inspection, is that you always pay your bill on time and never miss a payment. With perfect payment history the lender will report this to the credit bureaus and your credit score will increase.
The Next Step in Rebuilding Good Credit
After 6-12 months of steady payments on a credit card you will want to explore obtaining a personal loan. If your credit score is still on the low end of the scale, you will be offered a secured personal loan where you deposit cash or use personal property as collateral for the loan. In this instance, the lender does not look at your credit score but your good payment history on the loan will be reported and will help to improve your credit score.
If your credit score has improved enough, you could qualify for an unsecured loan. Unlike with the secured loan, the lender does not have any property or cash deposit to cover your loan payments if you default so they would most likely file for wage garnishment to recover the money you owe them. But if you are wise with the loan money and don’t spend it but simply put it in the bank to make the loan payments, then you can easily begin to rebuild your credit.
Don’t look at your first personal loan as a true loan where you use the money to buy something, look at it as a tool to rebuild your credit. The lender is giving you the money to reestablish credit and for that you are paying a small amount of interest but getting better credit.
Build Good Habits Along with Good Credit
Now with a credit card and a loan, you are well on your way to reestablishing good credit and making the most of your financial new beginning. To increase your credit score even more there are a few simple things to keep in mind.
First, you never want to have a balance on your credit cards that is close to or right at your credit limit. You want to show regular use but you also want to show regular payments and a low balance. This helps what is called your debt to income ratio. It is simply a guide to show that lenders have confidence in you and are offering you credit but you have not needed to use it all.
It is really an indicator of financial responsibility. And for the credit cards and loans that you do have a balance on, you want to be certain to maintain a regular and on time payment history. One missed payment can wipe out an entire year of hard work and on time payments. Payment history alone accounts for 35% of your credit score.
Paying a balance off early is also a good way to boost your credit score and it saves you added interest costs. A great way to ensure that you are paying all of your bills on time is to use a budget and calendar program to alert you of upcoming billing dates.
Don’t Be in Too Big a Rush
Rebuilding your credit takes time and there is really no short cut. If you apply for too many credit cards too quickly, you will drop your credit score. These “hard inquiries” are what happens when you apply for credit and the lender checks your credit score. If you do this too frequently you appear to be too dependent on credit. Simply put, it looks like you are trying to use credit to live above your means and that will decrease your credit score.
Be a Credit Score Success Story
It can be very difficult getting a title loan without a job after bankruptcy but it is possible if you are willing to work hard and be responsible. Taking the first step of learning about your current credit score and the options that are available is key to rebuilding good credit.
Then it is just a matter of remaining responsible and making the payments on time every month. After a year of consistent payments, responsible credit card use and learning to build good habits, you will be happy to see that your credit score is improving.