Congratulations! You’ve successfully served your 3 year period of bankruptcy and have been discharged, so what now? You’ve undoubtedly taken the most appropriate steps to settle your financial troubles by declaring bankruptcy, and all your debts are well behind you now. Bear in mind though, there’s still a lot of work required to get your finances back on track. The biggest issue that discharged bankrupts encounter is their opportunity to borrow money, and the main reason for this is their poor credit rating.
For the past three years, you’ve had no debts to pay back so your credit history has nothing to show with the exception of a bankruptcy mark against your name. There’s been no activity on your credit report, so a blank page will make lending institutions hesitant in lending money to you purely because they can’t ascertain your repayment behaviours. Rebuilding your credit history is the best way to get your finances back on course, and make your recovery process as smooth as possible.
How you can repair your credit report after discharge?
Considering that loan providers haven’t had the ability to inspect your financial management skills for the previous 3 years, you will want to begin illustrating healthy financial habits. Here’s a list of ways in which you can do this
- Stable employment
Achieving consistent and ongoing employment is a fantastic way to increase your financial security and demonstrate to lenders that you have a regular income stream. Regular employment will allow you to increase your savings and improve your overall financial circumstances, resulting in a better credit rating.
- Increase your savings balance
Your savings account is an asset, so increasing your savings balance gradually will display to lending institutions 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 history.
- Limit your credit applications
Each time you request a line of credit, it is registered on your credit report, so too many credit applications can adversely affect your credit history. After being discharged, it’s extremely important that you are pragmatic and cautious about the types of credit you apply for to increase the likelihood of approval. It’s best to make an application for just one line of credit at a time, and always remember that secured loans and options with a guarantor or joint accounts will increase the likelihood 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 additionally show financial institutions that you are financially reliable. Subsequently, your chances of acquiring 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 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 certainly improve your credit report and increase the confidence that loan providers have in your financial management abilities.
- Don’t hesitate to speak to lenders
If you want to make an application for a line of credit after your bankruptcy period, or identify what types of options are available to you, don’t be reluctant to talk to banks or other financial institutions to review your situation. They are in the best position to advise of your eligibility, and provide insight 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 kinds of promises to improve your credit report. Whilst many of them are effective in challenging 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 agencies since they “may not always be able to do what they claim they can”.
If you’re in need of any advice in repairing your credit history, or have any queries concerning your recovery process after bankruptcy, it’s always best to seek advice from qualified professionals. Speak with Bankruptcy Advice on 1300 879 867, or alternatively you can visit our website for more information: Bankruptcy Advice