Easy Ways to Rebuild Your Credit After Bankruptcy: Using Financial Tools

Bankruptcy is a legitimate way to get out from under what can feel like insurmountable debt. If your financial situation has led you to a point where bankruptcy was the only logical solution, we’re glad to hear that you took that option. But recovering financially from the inevitable credit hit after filing for chapter 7 or chapter 13 bankruptcy in Ohio can be a difficult task. That’s why we’re here to help.

We’ve already discussed how financial literacy plays a role. Now let’s see how using financial tools to your advantage can jumpstart credit recovery.

Build Credit as an Authorized User

If you’re having trouble getting approved for a secured credit card, you can talk to family and friends to see if you can be added as an authorized user on one of their credit cards. This means that you’ll have a card with your name on it that you can use for purchases, but the main account is not yours. This does not require you to apply: it’s simply a request that the account holder makes to the lender. If the primary account holder makes payments in full and on time and overall credit utilization is low, then when this information is reported to the credit bureaus it will have a positive impact on your credit score as well. It will be a slower climb, but this is a relatively safe strategy and can be effective when used in tandem with other credit building practices. 

If you are able to be added as an authorized user, view the account due date as applying to you too, and make it your goal to repay your friend or relative on or before this day. That will set you up for making consistent, on-time payments once you are able to hold your own credit card account.

Sign Up for a Credit-builder Loan

Created to help folks who either have bad credit or no credit history, a credit-builder loan works in reverse to a traditional loan. Typical loans give borrowers a lump sum of cash upfront and require repayment over a set number of months. A credit-builder loan turns this order on its ear. Lenders put aside the requested loan amount–sometimes in a Certificate of Deposit–requiring consistent payment over a set number of months. Once the loan amount is paid in full, the lump sum is then turned over to the borrower. 

Every payment should be reported to credit bureaus, so timeliness and consistency are key. Credit-builder loans are great alternatives for individuals whose credit history disqualifies them from traditional loans. They are also a wonderful way to prove your creditworthiness, since payment history can account for up to 35% of your total credit score. 

Find a Co-signer

If loans or rental agreements continue to be a struggle for you as you rebuild credit, a co-signer could be one way to help you qualify. A co-signer is an individual with a good credit standing who serves as a backup to repay a balance if you fail to make payments on time. The co-signer doesn’t have a right to the funds or financed property you’re trying to get hold of but is simply there to lower your lender’s perceived risk. Timely payments are the backbone of credit building, so it makes sense to prioritize these. That’s even more true when you realize that your late payments can negatively impact your co-signer’s credit score as well.

Clearly, a co-signer has nothing to gain, and plenty to lose, so it makes sense that it can be a touchy topic. It also makes sense that even the closest family member or friend may not feel comfortable acting as a co-signer for you. This is a highly personal decision, but if it works out, it is certainly a good way to build credit.

Consider A Line of Credit, Unsecured Loan, Gas Station or Retail Credit Card

Once you have put in some work and feel that your responsible financial decisions are paying off, you might feel confident enough to try credit again. But traditional lenders may not feel the same and could be unwilling to extend credit with a bankruptcy or foreclosure still on your record. Thankfully, you do have some additional options. A small line of credit can provide ready cash that you can draw from as you would from a checking account, but will require repayment every month like your credit cards. Fees and interest rates can be higher than average, but if you make good decisions, repay the credit, and don’t use the full limit, it will definitely offer positive reports to credit bureaus. 

Unsecured loans, also sometimes called personal loans or signature loans, do not require you to offer any collateral for the amount the lender is giving you. The application process is often less demanding than secured loans, but interest rates may be higher and terms may be less favorable. If you are looking for another way to rebuild credit, gas station and local retail store credit cards are often easier to get your hands on post-bankruptcy. Rates, fees, and terms may not be ideal, but if you focus on paying off your monthly balance that won’t matter as much and you will definitely help to prove your creditworthiness. Some credit card companies also offer free access to your FICO score, which will help you to regularly keep an eye on your credit rating.

Join a Credit Counseling Program

In addition to skillfully using financial tools, joining a credit counseling program can help you to get back on track in less time. That’s true whether you file for chapter 7, 11, or chapter 13 bankruptcy. At Hausen Law, we are happy to offer our clients access to the 720 credit repair program via our professional partnership that includes a credit education course and ready help to rebuild credit. We’re here as advocates to help you gain the knowledge and access to resources that you need. 

From learning how to read and analyze your credit report to applying what you learn in practical ways, the 720 credit repair program offers you a deeper understanding of finances and can help you create a solid plan to rebuild your credit. Within less than two years your credit score can improve and you can have a renewed sense of hope for your financial future.

Rebuild Credit After Filing for Bankruptcy in Ohio

Now that your bankruptcy proceedings are complete, you’re likely focused on repayment. You’re also probably worried about your credit score and how long it will take to rebuild your credit. At Hausen Law we know it’s difficult, but with the tips in this article and by taking advantage of our 720 repair program, you can reach your financial goals, even after a bankruptcy. Working with an experienced chapter 7 bankruptcy lawyer–like James Hausen and his team–is a great first step. At Hausen Law our Ohio bankruptcy lawyers are ready to help. 

Give us a call or fill out our online contact form and we will be in touch. Hausen Law is happy to serve all of Northeast Ohio, including the Akron, Canton, Cleveland, Wooster, Dover/New Philadelphia, and Youngstown communities. Contact us today to set up a free consultation and get started on your way to financial recovery.