A question that many individuals throughout Minnesota ask when they are considering or moving forward with bankruptcy is, “How am I going to rebuild my credit?”
Rebuilding credit can begin soon after a bankruptcy is discharged. If you file Chapter 7 bankruptcy, then your bankruptcy will be discharged within the year. If you file Chapter 13 bankruptcy, then your bankruptcy will be discharged after you have made all of your payments in the court approved repayment plan that you and your Minneapolis bankruptcy attorney worked together to create.
Building with Credit Cards
After bankruptcy, the credit card offers will start coming in the mail. Many of them will be high interest credit cards and others will be credit cards with annual fees, monthly fees, and maintenance fees. You can decide to opt for a secured card that has no fees and low APR. That is an option for you, but you will need to put a cash deposit on the card in order to establish your credit limit.
However, it is best to go with the card that has the lowest fees. Interest should not be an issue because your goal should be to pay off the balance in full every month so that you don’t have to pay interest on your purchases. From there, avoid cash advances since they have interest that can’t be avoided and you shouldn’t have to worry about doing balance transfers since you most likely don’t have any cards to transfer balances from. Just charge as much as you can afford to pay in full before the due date and you will be effectively rebuilding your credit.
Auto loans are not a good “go to” after bankruptcy. There are lenders that will loan individuals the money for a car as little as two to six months after bankruptcy, but the interest rate is going to be very high. Before it is all said and done, you could pay thousands of dollars in interest.
The best route to take is use and pay on a credit card as specified above. Many individuals throughout Minnesota and St. Paul have used this strategy and been able to secure lower rates on automobiles. It is all about being patient and utilizing other credit building resources before taking out an auto loan.
Borrowing from the Bank
A personal loan involves borrowing a small amount of money and then paying it back over time. Just because you filed bankruptcy doesn’t mean that you are going to have to pay a lot of money in interest. Of course, it depends on the financial institution, but there are many that use their discretion. Obtaining a small personal loan is good because you want to have revolving credit (credit card) and an installment loan so that you can boost your credit score faster. Just make sure you do not carry a balance on your credit card and that you pay your loan as planned so that you are successful in rebuilding your credit.