How can I repair my credit after my bankruptcy discharge?
Repairing credit after bankruptcy is possible! You must be smart, diligent and patient but by following a simple step by step plan you can work on rebuilding a good credit score. Rebuilding credit after bankruptcy should be a top priority as you will soon regain the ability to borrow. This means you can take full advantage of your new financial start!
Before you can begin working on credit repair, you must receive your bankruptcy discharge. It is important that you receive your bankruptcy discharge as soon as possible. The sooner you receive your discharge, the sooner you can begin rebuilding your credit. A record of your bankruptcy will also come off your credit report as quickly as possible.
Most Canadian bankrupts are eligible for an automatic discharge after 9 months of being bankrupt. In order to receive a discharge this quickly you must complete all of your duties and make the necessary payments to your trustee.
However, after your bankruptcy is over (usually in only nine months) credit repair can be achieved quickly.
Repairing Credit Steps
In order to rebuild your credit after bankruptcy follow these steps:
- Get your Equifax and Trans Union credit reports. Equifax and Trans Union are the two main credit reporting bureaus in Canada. You must check each report for errors, which is not uncommon. If you find any errors you must notify the credit bureau immediately.
- Set up a savings plan and start saving your money. The ability to borrow is based on your ability to manage money. If you have a savings account, you can show your bank that you are responsible with managing your money. When you were bankrupt you were likely making payments each month to your trustee. Bankruptcy Canada recommends continuing making those payments to a savings account.
- Use a secured credit. A secured credit card is like a normal credit card except you make a deposit to the secured credit card company which will then be your credit limit. For example, if you deposit $500 into an account with the financial institution offering the secured credit card you will have a $500 credit limit. Bankruptcy Canada recommends using this card for small monthly expenses. As you make these payments with your secured card it will show on your credit report as a paid credit card bill each month which will have a positive impact on your credit report.
- Use an RRSP. If you deposit money into your RRSP the bank will likely be willing to give you a loan that matches the amount you have deposited. By depositing into your RRSP you will receive a tax refund. You can then take that tax refund and pay off the loan you received from the bank. You will then have a paid off loan on your credit report. This will help improve your credit score.
You must live frugally and begin saving, but any bankrupt can begin rebuilding credit immediately and have a good credit score within 2 years of filing bankruptcy.