The truth is, if your bankruptcy is discharged, re-establishing credit can be done in as little as twelve months. As long as you know how the US credit system works, you can restore your credit quickly and painlessly.
1. Get it together.
Come up with a budget and a savings plan. You need to figure out how you're going to save. Also, make sure all of your old creditors know that you no longer owe them money. If they send you a collection notice, take care of it right away. Finally, reflect on what caused you to file bankruptcy in the first place and make sure you don't repeat the same mistakes.
2. Start hoarding cash and saving paperwork.
While saving a couple of months salary is probably the hardest part of the process, you need to have an emergency cash fund. Besides, you'll need cash for a down payment and secured credit cards. You also need to save all of your important financial documents like pay stubs, bank statements, and bankruptcy documents. Keep them in a safe place because you'll need them to show creditors in the future.
3. Time for a secured credit card.
A secured credit card is an excellent tool for re-establishing bad credit. First of all, as long as you have enough cash for a deposit, you can get a card. Secondly, they're considered credit and they'll help you build some positive credit history. But whatever you do, don't carry a balance on your new secured credit card and don't use it more than once. In fact, you want to use the card one time and then cut it up. That way, you'll still be getting credit and your credit report will show that you're a disciplined credit user.
4. Buy a car.
Choosing an inexpensive pre-owned car is the easiest way to get approved for a loan. It's also the best car to buy if you plan on trading it in within the next year. Ideally, you would buy a cheap car and then trade it after 6 to 12 payments have been made. This way, you'll get credit but you don't have to keep the car forever. By going used and cheap, you'll lose less money when you trade it in.
5. Get more credit.
Now that you have a secured credit card and a car loan that you've been making payments on, you have enough credit to get some low limit national credit cards (like Discover, Visa, MasterCard). Make certain that the cards you apply for do not have an annual fee, and you should also look into getting a credit card from your local credit union. Whatever you do, remember that if your application is denied you need to call and ask WHY. Often times you can convince a credit card company to approve a declined application with a little persistence.
6. You can now get the car you want.
The end is here. You've done everything right, a year has passed since your bankruptcy discharged, and your credit is now re-established. You can get the car you want.
Some things to consider as you re-establish. First, saving money is an important life skill. As long as you have savings you don't have any financial problems. Follow a budget, think before you buy anything, and don't put yourself in a position where you can financially fail if something goes wrong. Finally, remember what caused you to file bankruptcy and make sure you don't repeat it.
