Considering all that’s involved with filing for bankruptcy — from the decision to file, to the legal process, to the recovery — the last thing in the world you want or need to happen is to get off track again. Quite the opposite, in fact, you want to make the most of your clean slate and build your credit bigger and better than ever! Here’s how.
1) Keep an eye on your credit. Monitoring your credit reports on a regular basis will help you keep your eye on the prize. That is, a brand new start, with responsible credit use that you want to be sure you’re getting credit for as positive listings in your credit reports. That coupled with a rising credit score should provide any extra incentive you need to continue to manage your credit in a disciplined manner.
2) Pay your bills on time. Since your payment history represents 35 percent of your credit history, it is imperative that you pay your bills on time. Pay them early if that helps keep you on track. Or schedule automatic payments so that there is no chance you can forget.
3) Apply for a secured credit card. New credit (managed wisely) can go a long way toward boosting your credit score after a bankruptcy. Though they require an annual fee and come with higher interest rates, secured credit cards are easy to get and a surefire way to get your foot in the door. Once you have used your secured credit card responsibly for a number of months, you should be able to qualify for a regular credit card minus any annual fees and with lower interest rates.
4) Keep existing credit lines open. If you’re thinking of closing credit lines that remained open during and after the bankruptcy, think again. Closing them will only lower your credit utilization ratio. You’re best-served keeping them open and, instead, cutting up the cards so you’re not tempted to use them, if that’s your concern.
5) Keep a low credit utilization ratio. Try not to use more than 30 percent of your credit at any one time, as the more of your available credit you use, the more you are seen as a credit risk which will be reflected in your credit score. Aim to pay off your balances every month and you are good as gold.
6) Use your credit. It may be tempting to ensure a low credit utilization ratio by simply not using your credit at all. However, the key to building good credit is not having open lines of credit that never get used, but using your credit on a regular basis to prove you can handle it responsibly (i.e., pay your bills on time, maintaining a low credit utilization ratio, etc.).