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5 Major Steps to Building Your Credit After Bankruptcy

Contributor

Personal finance is a very touchy subject for many people. It is up an individual to learn how to take control of their finances by proper planning and maintaining a reasonable lifestyle. Some people, often entrepreneurs, may find themselves in serious financial troubles, rising from mismanagement and too much debt. One of the best ways to get out of it is by declaring bankruptcy and starting afresh. Contrary to popular notion, personal bankruptcy is a good thing. While starting afresh may sound daunting, it is possible to build back your credit and wealth by following these simple steps. If you are an entrepreneur, you should especially be diligent in managing your personal credit challenges.

personal bankruptcy

  1. Begin and Complete the Bankruptcy Process

Several factors may qualify you for bankruptcy protection. Some of them include if you are hopelessly trapped in debts, a major loss in income, or an accident. Begin the filing process and ensure that you complete it as soon as possible. Once completed, aim to achieve the automatic nine-month bankruptcy discharge so you can begin rebuilding your finances on a clean slate.

  1. Understand the Credit Score Chart and What Affects It

Educate yourself about credit score so you can avoid doing the things that invite a low score. The Canadian credit score begins from 300 to 900, with 300 being very poor and 900 being excellent. Aim for an above-average score (660 upwards). Some of the things that may affect your score include:

  • Credit History – A record of your previous debts and payment timeline. Full payments made on-time improves your score. And vice-versa.
  • Number of Inquiries – A record of your loan or credit card requests. The higher the requests, the lower your credit score.
  • Multiple Credit Systems – A multiple credit system such as mortgage, loan payment plan, and credit cards add points to your credit score.
  1. Settle Your Bills and Debts on Time 

Ensure to pay all your bills and debts on time. If it appears that you may be running late on any payment, apply for a cash advance from reputable Canadian providers such as 24Cash. Late or missed payments affect your score negatively.

  1. Review Your Budget

Create a monthly budget for all your expenses, starting with your debts. One of the main causes of personal bankruptcy is amassing too much debt. Cut down on your debts as much as possible. With a simple budget, you can pay your bills and still have enough money left for savings.

  1. Get Help 

While building an excellent credit score may be easy some people, others may find it challenging. If after your bankruptcy discharge it appears that you are headed for another personal bankruptcy, then seek professional help immediately before your credit score gets any worse. Credit Counseling Canada offers free webinars and credit counseling

It is crucial to be honest with yourself. Admit that you have a low score and commit to growing it. By simply following a plan, you can grow your credit score from very poor to excellent in just a couple of years.