Congratulations! You’ve successfully served your 3 year period of bankruptcy and have been discharged, so what now? You’ve undoubtedly taken the appropriate actions to address your financial challenges by declaring bankruptcy, and all your debts are well behind you now. Having said this, there’s still a considerable amount of work involved to get your finances back in order. The biggest issue that discharged bankrupts experience is their ability to borrow money, and the main reason for this is their bad credit rating.
For the past three years, you’ve had no debts to pay off so your credit history has nothing to show other than a bankruptcy mark next to your name. There’s been no activity on your credit report, so a blank page will make financial institutions reluctant in lending money to you purely because they can’t assess your repayment behaviours. Rebuilding your credit rating is the best way to get your finances back on track, and make your recovery process as smooth as possible.
How to rebuild your credit report after discharge?
Given that financial institutions haven’t been able to inspect your financial management skills for the last three years, you will need to start presenting healthy financial habits. Here’s a list of ways in which you can do this
- Stable employment
Securing stable and ongoing employment is an effective way to increase your financial security and show financial institutions that you have a regular source of income. Steady employment will allow you to increase your savings and improve your overall financial situation, resulting in a better credit rating.
- Increase your savings balance
Your savings account is an asset, so increasing your savings balance gradually will demonstrate to loan providers that you are financially responsible and are capable of making loan repayments. By putting money into a dedicated savings account each month, even a small amount, will improve your credit rating.
- Limit your credit applications
Every time you make an application for a line of credit, it is documented on your credit report, so excessive credit applications can negatively impact your credit history. After being discharged, it’s very important that you are pragmatic and mindful about the types of credit you apply for to increase your chances of approval. It’s best to request only one line of credit at once, and bear in mind that secured loans and options with a guarantor or joint accounts will increase the probability of approval.
- Think about a term deposit
If you’ve had the capacity to save money throughout your bankruptcy period, think about putting some of it into a term deposit account. Not only will you accumulate interest and boost your overall financial circumstances, it will likewise show lenders that you are financially reliable. Subsequently, your chances of securing a loan will be increased which leads to an improved credit rating.
- Always make repayments on time
One of the most important things you can do as a discharged bankrupt is to make any kind of repayment on time. Regardless if it’s your rent, electricity, or even a secured loan in your name, making these repayments on time will most definitely improve your credit report and increase the confidence that lenders have in your financial management skills.
- Don’t be afraid to talk with loan providers
If you want to request a line of credit after your bankruptcy period, or identify what types of options are available to you, don’t hesitate to speak to banks or other financial institutions to review your situation. They are in the best position to advise of your eligibility, and provide information on what options would work best for your individual situation.
Be cautious of credit repair firms
There are a number of credit repair agencies that will make all sorts of promises to improve your credit report. Whilst some of them are reliable in disbuting any incorrect listings on your credit history, 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 companies since they “may not always be able to do what they claim they can”.
If you need any help and support in rebuilding your credit report, or have any questions relating to your recovery process after bankruptcy, it’s always best to seek advice from qualified professionals. Reach out to Bankruptcy Experts Albury on 1300 795 575, or alternatively you can visit our website for more information: www.bankruptcyexpertsalbury.com.au