Congratulations! You’ve successfully served your three year period of bankruptcy and have been discharged, so now what? You’ve clearly taken the appropriate measures to settle your financial issues by filing for bankruptcy, and all your debts are well behind you now. Bear in mind though, there’s still a good deal of work required to get your finances back on track. The most challenging issue that discharged bankrupts face is their opportunity to borrow money, and the reason for this is their bad credit rating.
For the previous three years, you’ve had no debts to pay back so your credit history has nothing to show besides a bankruptcy mark against your name. There’s been no activity on your credit report, so a blank page will make lenders reluctant in lending money to you solely because they can’t ascertain your repayment behaviours. Repairing your credit rating is the best way to get your finances back on the right track, and make your recovery process as seamless as possible.
Ways to rebuild your credit report after discharge?
Given that financial institutions haven’t had the ability to evaluate your financial management skills for the past 3 years, you have to start presenting healthy financial habits. Here’s a list of ways in which you can do this
1. Stable employment
Obtaining regular and ongoing employment is a great way to improve your financial security and display to financial institutions that you have a regular source of income. Reliable employment will allow you to increase your savings and improve your overall financial situation, resulting in a better credit rating.
2. Increase your savings balance
Your savings account is an asset, so increasing your savings balance as time go on will illustrate to financial institutions that you are financially responsible and are capable of making loan repayments. By transferring money into a dedicated savings account every month, even a small amount, will improve your credit rating.
3. Limit your credit applications
Whenever you request a line of credit, it is documented on your credit report, so excessive credit applications can adversely impact your credit rating. After being discharged, it’s crucial that you are practical and cautious about the types of credit you apply for to increase your chances of approval. It’s best to request a single line of credit at a time, and bear in mind that secured loans and options with a guarantor or joint accounts will increase the likelihood of approval.
4. Think about a term deposit
If you’ve had the capacity to save money during your bankruptcy period, consider putting some of it into a term deposit account. Not only will you accrue interest and enhance your overall financial circumstances, it will also show lending institutions that you are financially responsible. Therefore, your chances of obtaining a loan will be increased which leads to an improved credit rating.
5. Always make repayments on time
One of the most important things you can do as a discharged bankrupt is to make any type of repayment on time. Whether or not it’s your electricity, rent, or even a secured loan in your name, making these repayments on time will evidently improve your credit report and increase the confidence that lenders have in your financial management capabilities.
6. Don’t be afraid to speak with lenders
If you want to make an application for a line of credit after your bankruptcy period, or discover what types of options are available to you, don’t be reluctant to speak with banks or other financial institutions to discuss your circumstances. They are in the best position to advise of your eligibility, and provide insight on what options would work best for your individual situation.
Beware of credit repair agencies
There are a number of credit repair agencies that will make all kinds of promises to improve your credit record. While some of them are useful in challenging any incorrect listings on your credit record, they may not be able to do anything else to improve your credit report. The Government’s MoneySmart website (https://www.moneysmart.gov.au/) advises discharged bankrupts to be “very careful” of these agencies because they “may not always be able to do what they claim they can”.
If you need any assistance in repairing your credit report, or have any questions about your recovery process after bankruptcy, it’s always best to seek advice from qualified professionals. Speak with Bankruptcy Experts Sunshine Coast on 1300 795 575, or alternatively you can visit our website for further information: www.bankruptcyexpertssunshinecoast.com.au