The best ways to Rebuild Your Credit Rating After Bankruptcy?
Congratulations! You’ve successfully fulfilled your 3 year period of bankruptcy and have been discharged, so now what? You’ve clearly taken the most suitable measures to address your financial difficulties by declaring bankruptcy, and all your debts are well behind you now. Having said this, there’s still a lot of work required to get your finances back in order. The main issue that discharged bankrupts encounter is their capability to borrow money, and the reason for this is their poor credit rating.
For the last three years, you’ve had no debts to pay back so your credit history has nothing to show with the exception of a bankruptcy mark next to your name. There’s been no movement on your credit report, so an empty page will make banks and lenders hesitant in lending money to you solely because they can’t ascertain your repayment behaviours. Rebuilding your credit history is the best way to get your finances back on track, and make your recovery process as seamless as possible.
How you can rebuild your credit report after discharge?
Considering that lending institutions haven’t had the ability to analyse your financial management skills for the past 3 years, you need to begin showing healthy financial habits. Here’s a list of ways in which you can do this
1. Regular employment
Securing stable and ongoing employment is an excellent way to improve your financial security and show lending institutions that you have a regular income source. Stable employment will allow you to increase your savings and improve your overall financial circumstances, resulting in a better credit rating.
2. Increase your savings balance
Your savings account is an asset, so increasing your savings balance as time go on will display to lenders that you are financially sensible and are capable of making loan repayments. By transferring money into a dedicated savings account every month, even a small amount, will improve your credit rating.
3. Limit your credit applications
Every time you apply for a line of credit, it is recorded on your credit history, so too many credit applications can adversely affect your credit history. After being discharged, it’s integral that you are sensible and vigilant about the types of credit you apply for to increase the likelihood of approval. It’s best to make an application for a single line of credit at a time, and remember that secured loans and options with a guarantor or joint accounts will increase the probability of approval.
4. Consider a term deposit
If you’ve had the opportunity to save money throughout your bankruptcy period, consider putting some of it into a term deposit account. Not only will you accrue interest and boost your overall financial position, it will additionally show financial institutions that you are financially responsible. Therefore, your chances of securing a loan will be increased which leads to an improved credit rating.
5. Always make repayments on time
One of the most important things you can do as a discharged bankrupt is to make any type of repayment on time. Regardless of whether it’s your electricity, rent, or even a secured loan in your name, making these repayments on time will certainly improve your credit rating and increase the confidence that loan providers have in your financial management capabilities.
6. Don’t hesitate to speak with lenders
If you intend to apply for a line of credit after your bankruptcy period, or discover what types of options are available to you, don’t hesitate to speak to banks or other financial institutions to review your circumstances. They are in the best position to advise of your eligibility, and offer guidance on what options would work best for your individual circumstances.
Be cautious of credit repair firms
There are a number of credit repair agencies that will make all kinds of promises to improve your credit record. While some of them are effective in challenging any incorrect listings on your credit history, they may not be able to do anything else to improve your credit report. The Government’s MoneySmart website (https://www.moneysmart.gov.au/) advises discharged bankrupts to be “very careful” of these companies because they “may not always be able to do what they claim they can”.
If you require any guidance in rebuilding your credit history, or have any inquiries regarding your recovery process after bankruptcy, it’s always best to seek advice from qualified professionals. Talk to Bankruptcy Experts Melbourne on 1300 795 575, or alternatively you can visit our website for additional information: www.bankruptcyexpertsmelbourne.com.au