Re-establishing Credit After Bankruptcy

  • By Jillian Taylor-Mancusi, B.A., C.I.R.P

If you’ve recently filed bankruptcy, you know that a damaged credit score is part of the process.  Re-establishing credit after bankruptcy can begin immediately with a few time-tested steps. Although a bankruptcy stays on your credit report for 6 years, you don’t have to wait that long to take action.

Start With Fresh Accounts at a New Bank

Going bankrupt gave you a fresh slate and a chance to start over. Your old bank may have a long memory and make it difficult for you to rebuild your financial health. Try opening a checking and savings account at a credit union or new bank. Fees vary widely, so be sure to check out the costs before you make a final decision.

Build a Savings Account

Your savings account is the most important part of your recovery plan and is the key to re-establishing credit. Not only will your savings account help you avoid debt, but it will help you access secured credit. When you build your budget, plan to make savings a high priority.  Keep in mind, even though you don’t have access to credit during bankruptcy, you can still prepare for life after bankruptcy.  It’s likely you’ll have some extra cash now that you don’t have so many bills to pay.  Put this money into savings so that upon discharge, you can use it to obtain a secured credit card.

Check Your Credit Rating

You should check your credit report right away. Although it’s not much fun to see your bankruptcy reported it’s important to check for errors on your report. It’s not uncommon to find accounts that are reported inaccurately or that shouldn’t have been reported at all. If there are errors, dispute them. You can use the online forms provided by Transunion Canada and Equifax Canada to dispute mistakes on your report.

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Live Within Your Means and Budget

Make a livable and workable budget by understanding exactly how much you have coming in and going out each month.  Knowing how much you have to pay for essentials like housing, utilities, food, and insurance makes it easier to figure out how much you can save.

Review your budget each month and make changes were necessary. Living within your means is easier when you have a budget to guide your spending.

Apply for a Secured Credit Card

Rebuilding your credit and earning a good credit score comes from paying back your debts on time. If your savings account has $1,000 in it, think about using $300 for a secured credit card. A secured card is a credit card that is guaranteed by cash you deposit into a special account held by the lender.

Make sure you choose a card that reports to Transunion Canada and Equifax Canada—only cards that report payments will improve your credit rating.  Watch out for predatory secured credit offers. Some charge outrageous fees. Compare rates, perks, and fees before you sign on the dotted line.

Pay your balances off each month and never allow even one late payment. Your score will reflect your good debt management and will steadily increase.

Re-establishing credit after bankruptcy is not as difficult as you might think. Most lenders understand that bad things happen to good people and are willing to help you improve your financial health and credit standing. As you demonstrate good money management skills, you will find more opportunities coming your way.

Jillian Taylor-Mancusi, B.A., C.I.R.P

Jillian has worked in the insolvency field since 1992. She is a graduate of the University of Manitoba. She received her Insolvency Counselor’s Qualification Certificate from Ryerson Polytechnic University in 1998, and in 2007 she attained her license as a Licensed Insolvency Trustee. Jillian is a Read More Jillian has worked in the insolvency field since 1992. She is a graduate of the University of Manitoba. She received her Insolvency Counselor’s Qualification Certificate from Ryerson Polytechnic University in 1998, and in 2007 she attained her license as a Licensed Insolvency Trustee. Jillian is a member of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP). She is Past President of the Manitoba Association of Insolvency and Restructuring Professionals (MAIRP).Jillian has held positions on the Armstrong Point Association, Executive of her local EDA Riding Association, Manitoba Highland Dance Association, and the Continuing Education Committee of CAIRP. Previously, Jillian was the Treasurer for the Parent Association at her daughter’s school. Currently, Jillian serves as the Vice Chair for Dressage Winnipeg. Close

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