3. Take Out A Credit Builder Personal Loan
For those who do not want the responsibility of a secured credit card or are not ready for the liability, another option offered by smaller banks and credit unions is a credit builder personal loan. Also known as a secured loan, a credit building loan offers an alternative to building credit over time.
Much like a secured credit card, a credit building personal loan is guaranteed by a personal deposit, which cannot be accessed during the term of the loan. Additionally, the creditor will normally report the loan to the major credit bureaus. However, unlike the secured credit card, a credit building loan offers a set amount of money to be paid over an amount of time. For those who are not ready for a credit card, a credit building loan offers a strong alternative to rebuild credit over time.
4. Get a Co-Signer for Financing
When it is time to make a big purchase, such as purchasing a car, a rebuilding credit report after bankruptcy may not be enough to secure financing. In this situation, those with a bankruptcy on their report are often forced into two options: purchase from a “buy here, pay here” lender, or ask a co-signer to help secure financing.
When purchasing from a “buy here, pay here” lender, the terms are often not in favor of the buyer. These lenders often institute a high interest rate, and require weekly payments that can strain an individual’s income. Furthermore, these lenders do not report on-time payments through the credit bureaus. The result of all of these situations is a higher payment that does not help rebuild credit.
Instead, asking a co-signer for assistance in securing a traditional loan can help individuals in bankruptcy build their credit over time. A co-signer is guaranteeing the loan based on their credit, alongside those who have subprime credit reports. The loans are then reported back to the credit bureaus, strengthening a rebuilding score along with the co-signers score over time.
As a point of caution, one misstep can create a major problem for everyone involved. A co-signer is equally responsible for the loan, meaning their credit report could be negatively affected by a missed payment or default. When asking for the help of friends and family, it is important to be responsible in paying on time.
5. Monitor Your Credit for Reporting and Errors
Finally, securing new lines of credit and paying bills on time are not the only means of ensuring a healthy credit report after bankruptcy. Arguably the most important part in recovering a credit score is constant monitoring of credit reports from all three major credit bureaus for regular reporting and errors.
Ensuring accounts are reporting correctly can help those coming out of a bankruptcy ensure their credit is back on an upward, healthy trajectory. For accounts that are not reporting, those receiving the credit can request the items get reported to one of the three major credit bureaus. Errors in the reporting process can be corrected by calling the reporting bank, or filing an inquiry with the credit bureau.
Although bankruptcy is a very serious decision with lasting ramifications, it does not have to be a situation that defines one’s permanent financial health. By taking control of finances and being proactive about credit responsibility, anyone can rebuild their credit and recover from bankruptcy in due time.