Chapter 7 bankruptcy can help end your financial nightmare, but also can bring new problems of its own once a judge finalizes your request. Learn how to start rebuilding your credit score right away so you don’t have to spend the next 10 years simply waiting for that dreaded bankruptcy notation to fall off of your credit reports.
1. Request a savings-secured loan from a local bank or credit union. Take your next paycheck, or part of it, to a local bank or credit union that issues savings or share-secured loans. Most community financial institutions won’t check your credit since you’re borrowing against your own cash.
How this works is you give a specific amount of money, usually at least $250, to the bank to open a savings account. Then the bank lends you that exact same amount of money and freezes the savings account as collateral. Each month as you make the loan payments, that amount will be freed up in your savings account; so you can get it right back if needed. Try to get multiple loans with at least 12 month terms and always pay the balance on time.
2. Open a secured credit card. That same bank or credit union may also offer savings-secured credit cards. These work slightly differently from that easy-to-get savings-secured loan; the bank’s staff most likely will want to check your credit. The savings account is held as collateral in case you default on the credit card account, but is not “unfrozen” as you make payments. If you get a $1,000 credit limit, then keep your balance to about $300 or below. Always pay above the minimum required to further maximize your credit rebuilding efforts. At some point, the bank may release your savings account and convert the card to an unsecured, traditional account.
3. Ask someone to make you an authorized user on their existing credit card accounts. If a family member has some existing credit cards with a positive payment history and reasonably low balances, then ask him to make you an authorized user. She can cut up the cards once they arrive so you never use the account. But you’ll still get the positive credit score benefits since most credit card companies place notations on your credit reports. Keep in mind that some people still won’t want to take this step to help you, even if you never see the actual credit card itself.
Be sure to avoid telephone solicitations and credit cards that charge high fees right off the bat. For more ideas on how to improve your financial health, check out Quizzle.com, where you’ll find out your potential for credit improvement and get the most affordable credit monitoring on the web. And be sure to read these other great articles:
- 5 Ways to Improve Your Credit Score
- Playing Parent to Your Finances
- 10 Credit Score Facts and Fictions
- Debt Consolidation vs. Credit Counseling: What’s the Difference?
- Easy Budget Planning for Couples