Pay bills on time to rebuild your credit record


Once you emerge from bankruptcy court protection, you begin the long journey of rebuilding your credit record.

Sometimes, you won't be able to immediately get credit extended to you. Many times, though, creditors will give you a credit card or auto loan, knowing that you can't file for bankruptcy again for years, credit experts said. The catch is you'll pay a high interest rate for that credit.

"You see those signs 'No credit? Bad credit? No problem.' It's no problem for them. They will get you at 20 percent," said Joanne Hamilton, an educator at the University of Maryland's Cooperative Extension.

To get the low rates offered to other consumers, you'll have to show creditors that you are responsible. And that can take years of paying bills on time.

A bankruptcy is the worst thing you can do for your credit score, said Ryan Sjoblad, a spokesman for, a division of Fair Isaac Corp., which developed the most widely used credit score. A score is a number that tells creditors the likelihood that you'll repay them and determines what interest rate you will be charged.

One way to start the process of improving your credit record is by getting a credit card and using it for small purchases. Never charge more than you can afford. And make sure you pay the balance off each month on time.

Don't apply for lots of cards. Stick to no more than two, Hamilton advised.

If you can't get a regular credit card, try a secured card, where you deposit, say, $500 or $1,000 in a savings account, and that becomes your collateral for a line of credit. It works like a regular credit card when it comes to rebuilding your credit record.

Shop around for a secured card. Some lenders charge a startup fee, others don't, said Linus Campbell, director of education for Consumer Credit Counseling Service of Maryland and Delaware.

Track expenses, knowing how much money is coming in and going out. Build up savings so an emergency expense won't put you in a financial tailspin.

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