Bankruptcy to BMW
Tips to Rebuilding Credit After Bankruptcy.
Ten years ago, in November, life was very different. Instead of celebrating the Thanksgiving holiday, I was trying to prepare my own paperwork to file bankruptcy. Why was I preparing my own legal paperwork? Because I couldn’t even afford to have a lawyer prepare and file it for me. The best that I could do was prepare it myself and pay to have a paralegal review it.
For the record, I was never irresponsible with money. I just chose an irresponsible partner. The more I earned, the more he spent. I worked myself into the hospital, literally, the more he spent. He didn’t work at all. Nor did he care for our children or do housework. He did nothing but watch tv.
Mounting medical bills for my unknown illness which turned out to be stress, and the household bills, were overwhelming. Add to that, a husband that has nothing but time to take out credit cards, loans, and lines or credit in my name, and his love for young women. My finances were shot. We as a couple filed for bankruptcy, and once that was final, I filed for divorce.
For the next seven years, I did nothing with my credit.
I did not take out credit for anything.
I financed nothing.
I did not accept any of the bazillions of credit card offers you get after a bankruptcy.
I paid my bills on time, but that was it. And I never once checked my credit score.
Fast forward seven years, things have changed. Finances have changed. I am in a great relationship, and we want to buy a house. That requires decent credit. So it was time to do the dreaded credit check.
My credit score was around 640. Not completely terrible, but not great either. It had gone up on its own, just by paying my bills on time.
But how could I increase my credit score?
First, I reviewed my credit report for errors and or bills that needed to be paid. I had a few accounts that were filed on my bankruptcy but never removed from my credit report, so I contested them and had them removed.
I also had a few small medical bills that were over do, and in collections, so I paid those off. Those are the easiest to get out of the way.
The next step in building credit is using credit. I got a two credit cards.
The first was a visa card. I did my research and found one with a lower interest rate and some decent perks. That visa had a $500.00 limit. For the first six months, I would charge one tank of gas per month approximately. $50.00-$60.00. Then when the bill came, I would pay all but ten or 20 dollars, leaving a small balance. The next month I would do the same and again pay it back down to 20 dollars.
Month seven was November, and Black Friday, so I took a cash advance of 400.00. This was planned. Months of small purchases/payoffs, then one random month of a higher, but not maxed out, balance.
DO NOT MAX OUT YOUR CARD, EVER.
When my next payment was due, instead of paying the minimum, I paid a higher payment of 200.00. For subsequent two months I paid the minimum payment, thus showing them I can responsibly make payments on a slightly higher balance. Then one more large payment, which brought the balance back down to 20.00.
The second card was one that I wanted, for no other reason than I wanted it. Oh, I justify it, as credit building, but I simply wanted a Sephora card. But I am responsible. The highest balance it has ever had was 465.00, and that was at Christmas time. I should note that my limit on my Sephora card is 1100.00, so I was nowhere close to maxing it out, and I paid it off the following month. Most months it has an average of $50.00-100.00 charged on it. (I'm a 43 year old woman, it takes a lot to look this passable.)
I don’t actually recommend getting a store card of any sort. They usually have high interest rates and late fees. You don’t want to get yourself back into a pool of debt you cannot get out of.
However, many credit building websites recommend store cards because they are often easier to get.
To build credit, you must use it. But if you use it too much, that looks bad and lowers your score.
There is a fine line between using credit and abusing it.
Some other quick tips to rebuilding credit:
1) If you don’t want to get an actual credit card, get a secured credit card. You must provide a deposit up front. Use it to make small purchases. And pay it off in full each month. Those payments add to your payment history and improve your credit score.
2) Request to be an authorized user on your partner’s account if they have good credit. (This was something that I also did to improve my credit.)
3) If you have a credit card, and a good payment history, request credit limit increases.
4) Make sure your utilities are showing up on your credit report, if you have a history of on time payments.
5) Above all, make sure that you are making all your payments on time. From credit cards to rent and everything in between, pay it on time.
6) Create a notebook that keeps track of every bill that you have, the balance and the due dates of everything. Organize all your bills monthly. Dividing bills according to payday/due date, so that you always know what bills come out of what paycheck. This helps ensure nothing is ever forgotten or late.
Don't leave it to memory because in the crazy hectic lifetime that we live in, its easy to get distracted or forget something.
Rowen is a Mother, Wife, Domestic Violence Victims Advocate, community volunteer, and nature lover. Most of her time is spent with her family or volunteering in her community. Rowen has a degree in Psychology, with a concentration in Family Counseling and Minoring in criminal justice. Writing has been her passion since high school and she enjoys using it to help others.
