After Bankruptcy: Repairing Your Credit Rating

After Bankruptcy: Repairing Your Credit Rating

Courtesy: David Sklar & Associates, www.davidsklar.com

Repairing Your Credit Rating After Bankruptcy

Your bankruptcy has given you a fresh start by removing your unsecured debts. You now have the freedom and the tools to build a brighter financial future for you and your family.

Note:

for up to 7 years after your bankruptcy is complete (discharged), your credit rating/history, will show that you have been in bankruptcy. This means, that you will have to work hard and consistently to repair your credit rating.

Start Smart

One of the smartest things you can do is to speak with your bank. Book an appointment, and let them know that you want to rebuild your credit history. Also let them know that you would eventually like to get a secured bank credit card*, and ask them what you will have to do in order to earn one from them. It may take a long time before you will be eligible, but it is an excellent tool for repairing your credit history.

For the most part, banks will only discuss secured credit cards at the branches and do not provide online or call center information on them. If your bank does not carry secured credit cards, you might consider finding a bank or credit union that does.

If you don’t have one, open a savings account – that you regularly make deposits to. Setting up an automatic deposit from your paycheque is a great way to make sure you are consistent. This will show your bank that you are serious about better managing your money, as well as improve your financial security.

Why not start by putting in the same monthly amount you were paying into your bankruptcy during your bankruptcy period? After all – you successfully balanced your budget around paying that amount.

If your banker recommends it, after a few months, you might be able to make a small demand loan on your saving account. This is where the amount of the loan is less than the total amount in your savings accounts. The money in your savings account becomes the security for the loan. Do not spend the money from the loan! Pay the loan back quickly. This will then be recorded in your credit history as a favorable event.

* Secured Bank Credit Cards

A secured bank credit card should not be confused with a pre-paid credit card. A secured card normally works this way:

You deposit a set amount with the bank in a savings account or GIC that you will not have access to.

Your deposit will normally be earning interest.

Your secured credit card will most likely have a credit limit that is less than you have on deposit.

If you have a balance owing on your secured card, you must make at least minimum payments on your credit card, on time, every month. We recommend paying in full every month. Note – payments are not made out of the secured account, you must make them yourself.

With your bank’s approval you might be able to increase the amount you have deposited and thereby increase the amount of your credit limit.

Improving Your Credit Rating with a Secured Bank Credit Card

Your use of your secured credit card will be reported to the credit rating companies.

If you always pay the minimum or more on time, keeping your balance well below your maximum – your credit rating will improve.

Warning: if you do not pay the correct amount on time, all the time – your credit rating will suffer.

Use Savings and Credit Wisely to Repair Your Credit Rating

Having successfully completed your bankruptcy, you realize that credit is an earned privilege and a convenience – not a way to finance a life-style. By saving for your future, staying out of debt, and improving your credit rating – you will be building a brighter financial future for you and your family.