How to get your Credit Back after a Bankruptcy

Getting your credit back after bankruptcy is very important, as it will be a long time before you are able to file bankruptcy again.  While you will want to get your credit back as quickly as possible, you also need to be cautious about it so that you do not end up back in bankruptcy court in ten years, or worse, wind up fighting creditors on your own without the possible remedy of bankruptcy.

While many people just want to start rebuilding their credit right away, the wisest course of action is to first build up a savings cushion.  You need to build up enough savings that you can afford to buy everything that you would normally buy on credit in cash.  This will help you as you are attempting to rebuild your credit as you can pay everything off immediately in the event of an emergency.  This will keep you out of debt so that you do not have to worry any debt you accrue as you rebuild your credit score.

It is important to remember that your credit score is a grade of how you handle your debt.  This means that to get your credit back, you will have to incur some debt.  The main categories of debt are usually auto loans, home loans and credit cards.  The best place to start getting back to having a good credit score is with a credit card.  If you get a secured credit card from your bank, this is often the best option.  Charge a few things each month that you would normally pay cash for, and send the check straight to the credit card company.  This will show that you are using your credit responsibly.  Try to get two lines of revolving debt such as this to maximize the effect that it will have on your score.

An auto loan will also help your credit score.  There is a slight problem with auto loans in that you are almost guaranteed to be paying interest, especially after a bankruptcy.  However, if you play your cards right, you can pay a minimal amount of interest and still be able to improve your credit score.  The first thing that you need to do is to buy a car that you could pay cash for if you had to.  The second thing that you need to do is to get the lowest interest rate possible, and make sure that there is no prepayment penalty for paying off the car.  Pay on the car for about a year before paying it off completely so that the regular payments have time to register on your credit report.

Getting a house is another story.  If you do both of the above, it is likely that you will be able to buy a house eventually as well.  While it is best if you can buy your house in cash, this is not realistic for most people.  You do, however, need to plan to have at least a 20% down payment, and do not buy more house than you can afford.  Make sure that when you get a loan for your house, the payments are not more than 30% of your take home pay.  This way, you will still have money to live after making your payments.