Best way to rebuild credit after bankruptcy?

A reader wrote in with the following question(s):

I just filed bankruptcy last year.  I am paying back 7- percent within three years.  I also owe 22,000 in school loans.  I was wondering what is the best way to get my credit back up, also what can I do about my school loans? Thank You

With such a generic question, I’m going to have to make some assumptions in order to answer. I’m going to break this question into first speaking about rebuilding credit, and second regarding the school loans.

In order to rebuild your credit Ashley, your best bet would be to start and rebuild it with a secured credit card of some sort. In addition, pay off your bankruptcy debt as agreed in the terms of the bankruptcy. A secured credit card is simple to get and anyone can qualify, all you do is pay cash upfront for your credit line. For example, you want a $500 credit line, you pay $500 cash upfront. That gets you the card, then you spend on that card, and pay the bill as you would any other card. You don’t get your $500 back until you close the account, as the $500 is used as collateral to insure the Card company doesn’t get burned if you don’t pay them. This will certainly help you re-establish your credit, however, it will come with a cost, as some of the card companies charge exorbitant interest rates. The key would be to carry only a small balance on the card while meeting the payments each month. Not to mention, some of the card companies charge you an annual fee to carry the card. Make sure the card company reports to the credit bureau!

Here are a few secured credit cards you could look into if you’re interested in getting one:

VISA Secured Credit Card – Reports to All 3 Major Bureaus

Get a Prepaid Visa Card – No credit check. Quick approval. Shop online, pay bills, use ATMs

Visa Prepaid RushCard – FREE Direct Deposit, Online Pay Bills, Get Cash from ATM’s, Guaranteed Approval!

Silver Prepaid MasterCard card

100% Guaranteed Approval Debit MasterCard

With regards to your school loans, you didn’t tell me much. What are your options? Pay it off. If you haven’t consolidated them, do so if it will save you money, it’s quick and easy, check out this government site. If you consolidate and automate your payments, you can usually get the loan company to reduce your interest rate in agreement for having automatic withdrawals from your account. If you haven’t used up your deferment options, you maybe able to take a break for the payments if you’re facing a temporary hardship.

Regardless, you should start an emergency fund, so you have cash to pay for emergencies, and you don’t have to fall back on racking up debt when something goes wrong. Spend responsibly and don’t use more than half your credit line. If possible, get a couple of secured cards and keep low balances, usually, within a year, you should be able to get a regular, unsecured card and you’ll be on your way to handling credit responsibly! Hope this helps!

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