If you've recently filed for bankruptcy, had your debts discharged through bankruptcy, or are considering bankruptcy, there is something important to consider. What will you do now or once your debts have been discharged? When you're weighed down with debt it's easy to get so focused on getting out from under it that you think about nothing else. But once that debt is gone, and even before, it's important to give some thought about what you will do going forward to make sure you don't run into these problems again.
Your credit score
In case you haven't heard, bankruptcy doesn't look so good on your credit history. You should know that if your debts are discharged through bankruptcy, your credit score will take a pretty big hit. You might be thinking that your credit score is just a number right? Why does it matter? Your credit score plays a big part in your financial life. It determines who is willing to lend to you, how much, and at what interest rate. Post bankruptcy you can be sure that there will be fewer lenders willing to loan you money. Those that do will offer only a small line of credit and at a high interest rate.
There is still hope
Many who've filed for bankruptcy mistakenly believe that there is no way they'll be able to borrow money for the next few years and so they don't even try. This is a huge mistake. First of all you need to start borrowing money again as soon as possible to start rebuilding your credit. And second, there will still be plenty of lenders willing to loan money to the recently bankrupt.
Lenders know that according to the law, you can only file for bankruptcy and receive a discharge of your debts every eight years. So if you've recently filed bankruptcy successfully, your lenders know you won't be doing it again any time soon. Also, bankruptcy is something most people only go through once in life. So even if you've just filed for bankruptcy, you can still get a line of credit.
Credit cards: secured vs. unsecured
As already stated, your first order of business after bankruptcy should be to obtain a line of credit. You want to start building a positive credit history as soon as possible after bankruptcy. There are two different types of credit cards: secured and unsecured.
A secured card will require you to give the lender cash as collateral. They will then extend a line of credit to you equal to the amount you've given them. An unsecured credit card is the most common type and requires no collateral though they can garnish your wages if you fail to pay it back.
A secured card is easier to get your hands on immediately after bankruptcy but you may also be able to get an unsecured card. Either option will still allow you to being rebuilding your credit so take advantage of any offer you can get. Above all, make sure you're paying off your card in full each month.
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