Ways to Build Credit After Bankruptcy

Using only cash will not help you rebuild your credit after bankruptcy.dix dollars, 10 dollars, ten dollars, dieci dollari, ten box image by Blue Moon from Fotolia.com

If you are facing huge credit card debt, bankruptcy may be the only option to keep your family from putting every last dime toward interest payments. You may wonder whether bankruptcy is right for you because you want to purchase a house and car in your future. Rest assured that you can get loans without gigantic interest rates by following a few simple tips to repair your credit after bankruptcy.

Fix the Root of the Problem

Several problems can lead to a bankruptcy. Some of the main issues leading up to bankruptcy include not having an emergency fund and being unprepared for major medical bills. Creating a savings account for emergencies and getting health insurance can help fix these issues. Although bankruptcy is not always the result of frivolous overspending, you need to evaluate your budget to make sure you do not overspend. Getting additional sources of income can fix your income problem. Make sure that no more than 60 percent of your income goes toward necessities.

You need to use credit cards to get your credit score to improve so do not rely only on cash. The two types of credit you need are installment, which includes student and auto loans, and revolving, such as credit cards. You and your family may find it unimaginable to take out credit after a bankruptcy, but you can use the situation to your advantage. Taking out a secured card, which typically has low credit limit and is secured by a deposit, won't let you go into debt and improves your credit. Pay back whatever you charge immediately after spending it to avoid paying interest.

Student loans are the only type of debt that typically cannot be discharged through a bankruptcy. Face your student loans head on, and start making aggressive payments. Don't simply make the minimum if you can pay more. Now that you have no other debt, take anything you would have paid on other debts, such as credit cards, and pay toward the student loan. Try to pay two to three times what the minimum is, and you may be looking at having a loan paid off in a few years. Paying off your student loan will improve your credit score.

Put off buying a house and cars as long as possible to ensure that you have built up enough savings for emergencies and necessities first. The last thing you need is to accumulate more debt through unplanned expenses and eventually have to file for bankruptcy again.