Rebuilding Your Credit After Bankruptcy (Part 1 of 2)

Getting your bankruptcy discharge is a milestone event in reclaiming your financial future. In some ways, however, this is just the beginning. In order to maximize the value of your bankruptcy and get back on the right track, you need to rebuild your credit. For many people, this means relearning how to manage their finances.

Kain & Scott is a Minnesota bankruptcy firm that helps Minnesotans make a fresh start. We help our clients through the bankruptcy process and beyond and so in the next couple of posts, we’re going to review some ways that can help you rebuild your credit in order to build a better future.

• Find or Keep a Steady Job
• The most important step towards rebuilding your credit is establishing or maintaining a steady income in order to stay on top of your bills. This may require taking a job that you wouldn’t normally take or staying at a job that you’re unhappy at. Here are a few considerations to keep in mind:
• You may need to prioritize stability over opportunity for the time being.
• Don’t leave a job or threaten to leave until you have been hired somewhere else.
• Be a dependable employee - be on time, try to limit unscheduled absences, and resist the temptation to leave early.
• Don’t let minor issues jeopardize your employment. No job is perfect, and again, the most important thing right now is stability.

If you work on a commission basis, as an independent contractor, or otherwise have cyclical income, you may want to consider getting a second job to help steady your income and fill in the gaps. Moonlighting for a few hours at night or on the weekends can make a big difference.

Create a Budget

Creating a budget is an essential step when it comes to maintaining control over your finances. Here are some suggestions that can help you create a budget:

• Necessities such as housing and food should be your top priority.
• Be realistic, but not indulgent: you will probably need to buy new clothes at some point, but you don’t need the most-expensive name brand-clothing. However, you should look to limit unnecessary spending wherever possible.
• Budget some of your money to go into savings.

Establishing a budget is vital to rebuilding your credit, but it is perhaps even more important that you stay within your budget. At least once per month, you should be reviewing your spending to make and making necessary adjustments.

Pay Your Bills on Time

It goes without saying that you need to pay your bills in order to repair your credit. However, many people don’t realize how important it is to pay them on time. Not only will timely payment save you from late fees and other penalties, but even a single late payment can damage your credit. Paying bills late can quickly undo all of your hard work to rebuild your credit and get your life back on track.

Don’t Take on Unnecessary Debt

This may seem obvious, but many people fall victim to the lure of easy credit when they find out that they can still get a loan despite their previous bankruptcy. Generally speaking, these loans carry high interest rates and will only add to your monthly expenses. Ask yourself whether you really need whatever it is that you are thinking about buying or whether you can make the purchase without the loan.

Avoid Credit Card Spending

This falls under the category of unnecessary debt but warrants separate consideration. Credit cards are incredibly convenient, which is what makes them so dangerous. In case you aren’t already aware, the interest rate on your card is surprisingly high and late payments are subject to heavy penalties. You may be tempted to think you’ll pay it off at the end of the month, but chances are that you’ll have other unplanned expenses that will prevent you from doing so. The bottom line is that you should avoid putting any purchases on your credit card unless absolutely necessary.

Get Rid of Unnecessary Expenses

In addition to watching your debt, another way to rebuild your credit is to get rid of unnecessary expenses. You want to specifically look at monthly, recurring expenses that are billed to you automatically. Here are some common monthly expenses that are easy to cut:

• Thanks to a variety of online options, you may want to consider cutting your cable television service.
• Unlimited data plans are expensive. Figure out how much data you actually use, and see if you can reduce your wireless phone bill by going to a reduced data plan.
• Paying for a gym membership you don’t use? Consider working out at home or exercising outdoors.
• Memberships and services that you can live without.

While this may not directly repair your damaged credit, it will free up some cash that you can use to stay on top of your expenses.

Start Saving for Emergencies

Most people don’t mean to go into debt, but it happens when they don’t have the cash on hand to deal with emergencies. By establishing an emergency savings fund, you’ll have a way to pay for unexpected expenses instead of putting it on your credit card.

Kain & Scott - Minnesota Bankruptcy Lawyers Helping You Rebuild Your Future

With decades of experience helping Minnesotans through the bankruptcy process, we here at Kain & Scott believe that our obligation to our clients doesn’t end at the courthouse steps. We help our clients navigate the financial challenges they face once their bankruptcy case is finished because we know how important it is. If you’d like to discuss how we can help you, call us at 800-551-3292 or contact us online in order to schedule a free consultation with one of our attorneys.