How to Repair Your Credit Rating After a Bankruptcy

Declaring bankruptcy is a decision that not only affects your finances, but also the health of your credit rating. However, bankruptcy is also an opportunity to start fresh and re-establish good financial behaviours. Whether you have recently completed the bankruptcy process, or are about to go through it, knowing what steps you can take to rebuild your credit afterwards can be helpful. Here is what you need to know:

What are the effects of bankruptcy on your credit rating?

Filing for bankruptcy will immediately give you an R9 credit rating. This rating stays on your file for approximately seven years, or six years from the date of discharge. However, as soon as you are discharged, you can take steps to begin rebuilding your credit rating to improve your financial standing.

Here are a few simple things you can do until the bankruptcy notation is removed from your credit report:

• Pay all your bills on time. Whether you have secured loan payments or utility bills to pay, it is important to pay them before their due date to build a good credit history. Set reminders on your phone, or use this pay cheque planner to set up your bill payments to coincide with the timing of your paycheques.
   
• Apply for a secured credit card. Different from a regular credit card a secured card requires a deposit up front, which is often (but not always) the limit on the card. With this card, start a healthy habit of paying it off in full every month, as this will help bring your credit score up, even as your report still has a bankruptcy notation.
   
• Start saving money. One way to rebuild your credit is to show you can handle money. Lenders will look at your assets and savings when determining whether to approve a loan. Start putting some money aside into a savings account or build an emergency fund for unexpected expenses so you don’t need to rely on credit or loans.

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Deciding to declare bankruptcy is a tough decision to make and while it discharges most unsecured debt, it will also affect your financial standing. Take the lead and start rebuilding your credit history to improve your credit rating as soon as you are discharged. For more tips on how to bounce back after a bankruptcy, check out our blog at BDO Debt Solutions Saskatoon.

Need other #MoneyManagement tips? Join the conversation and keep an eye out for my next column for more #DebtSolutions