Congratulations! You’ve successfully served your 3 year period of bankruptcy and have been discharged, so now what? You’ve clearly taken the appropriate actions to address your financial troubles by declaring bankruptcy, and all your debts are well behind you now. Despite this, there’s still a good deal of work involved to get your finances back on track. The most challenging issue that discharged bankrupts confront is their ability to borrow money, and the reason for this is their bad credit rating.
For the last 3 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 movement on your credit report, so a blank page will make banks and lenders hesitant in lending money to you only because they can’t evaluate your repayment behaviours. Rebuilding your credit rating is the best way to get your finances back on course, and make your recovery process as smooth as possible.
Ways to rebuild your credit report after discharge?
Given that loan providers haven’t been able to assess your financial management skills for the previous three years, you will need to start illustrating healthy financial habits. Here’s a list of ways in which you can do this
1. Stable employment
Acquiring consistent and ongoing employment is a great way to boost your financial security and show financial institutions that you have a regular stream of income. Regular employment will allow you to increase your savings and enhance your overall financial situation, leading to a better credit rating.
2. Increase your savings balance
Your savings account is an asset, so increasing your savings balance in time will illustrate to loan providers that you are financially sensible and are capable of making loan repayments. By transferring money into a specialised savings account every month, even a small amount, will improve your credit history.
3. Limit your credit applications
Whenever you request a line of credit, it is registered on your credit report, so excessive credit applications can adversely affect your credit history. After being discharged, it’s crucial that you are pragmatic and mindful about the types of credit you apply for to increase the likelihood of approval. It’s best to make an application for a single line of credit at once, and remember that secured loans and options with a guarantor or joint accounts will increase the chances of approval.
4. Consider a term deposit
If you’ve been able to save money during your bankruptcy period, contemplate investing some of it into a term deposit account. Not only will you accumulate interest and strengthen your overall financial circumstances, it will also show lending institutions that you are financially reliable. Therefore, the likelihood of acquiring 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 definitely improve your credit report and increase the confidence that lending institutions have in your financial management skills.
6. Don’t be afraid to talk to lending institutions
If you intend to make an application for a line of credit after your bankruptcy period, or uncover what types of options are available to you, don’t be reluctant to talk to banks or other financial institutions to discuss your circumstances. They are in the best position to advise of your eligibility, and provide advice on what options would work best for your individual situation.
Be mindful of credit repair firms
There are lots of credit repair firms that will make all sorts of promises to improve your credit record. Whilst 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 record. The Government’s MoneySmart website (https://www.moneysmart.gov.au/) advises discharged bankrupts to be “very careful” of these firms due to the fact that they “may not always be able to do what they claim they can”.
If you need any expertise in repairing your credit report, or have any inquiries concerning your recovery process after bankruptcy, it’s always best to seek advice from qualified professionals. Speak with Bankruptcy Experts Frankston on 1300 795 575, or alternatively you can visit our website for more information: www.bankruptcyexpertsfrankston.com.au