How do I rebuild my credit after my bankruptcy?
The fact that you filed bankruptcy remains listed at the credit bureau for 7-10 years following your discharge from bankruptcy. Logically this information will impact the decision of anyone investigating your credit rating and therefore you may find it more difficult to obtain credit.
Your ability to rebuild credit after filing bankruptcy is better than it has ever been. After you get your discharge, you will receive many solicitations from lenders offering to finance homes, vehicles and credit cards.
Here are some tips to responsibly and successfully rebuild credit:
• Retain a copy of your discharge order (Bankruptcy) or Certificate of Full Performance (proposal) and the final Statement of Receipts and Disbursements which shows any distribution to your creditors (sent to you by your trustee generally 12 to 18 months following your discharge). This information may be useful to provide to your lender, particularly where your creditors received a significant distribution.
• File a personal statement at the credit bureau. The credit bureaus will accept a 100 word statement by you that is provided to any party requesting a credit report.
• Find a friend or relative to co-sign for you on a loan and pay it on time.
• Apply for store and gas credit cards that you would normally pay cash.
• Pay all your bills on time to avoid your creditors filing negative reports at the credit bureaus.
• Live within your means. Do not unnecessarily increase your debt to income ratio by taking on credit to purchase luxury items that you DO NOT NEED. Your payments on consumer debt should equal no more than 20% of your expendable income after costs for housing and a vehicle.
• Look for car dealers and mortgage brokers that attest to be “bankruptcy friendly”. Buy a used car so you do not get hit with the depreciation that occurs during the first two years of a new car purchase.
• Pay your reaffirmed, pre-bankruptcy debts on time.
• Open a savings account to demonstrate your financial stability. You may find it useful to open this account at a separate bank where access is not convenient. Deposit regular payments to build the balance (a portion of your next raise, bottle recycling fees, rolled coins, etc. that are not readily missed). You may also want to investigate your company payroll benefits as some employers offer payroll deductions for Canada Savings Plans.
• Apply for a secured card where you deposit cash and charge against it. Pay advances back over two months so that they will be reflected as positive marks on your credit report.
How do I obtain a credit card after my bankruptcy?
It is possible to obtain a credit card after bankruptcy. You should consider the following options in obtaining your credit card.
• Apply for a credit card that was not included in your bankruptcy.
• Obtain a credit card in your name that is co-signed or guaranteed by your employer or other third party.
• Ask your bank if they have options for a credit card, perhaps with a prepaid balance or secured by a savings account.
• Apply for a secured credit card with one of the following companies:
- Home Trust Company VISA
- Horizon Plus Mastercard or
- Capital One Mastercard.