Although there may be a few potholes on the road to bankruptcy recovery, one of the biggest can be lack of patience. You’ve done everything right… you cleaned up your credit report and got rid of incorrect and unverifiable information, you obtained a secured credit card or two and have been using them and paying them on time. Maybe you even got a car loan or a new cell phone contract. That’s great! But you want something more.
Well, at this point, and especially in this economy with tighter credit granting guidelines (which may never return to the level they used to be at), it’s more important than ever to just “set it and forget” – at least for a while. What do I mean by that? It’s time to just use the credit you have, pay on time and let your credit rebuild itself. You may be at a point where you are still not a good credit risk for a mortgage, apartment lease or car loan. Just getting a secured credit card and using it for a few months won’t be enough.
Good Things Come To Those Who Wait
Once you have your credit report cleaned and showing everything correctly, it’s time to just use the credit you have wisely for a year or two, minimum. Many lenders will want to see at least two years of re-established credit AFTER bankruptcy before extending credit to you. So, the sooner you can get some credit reporting to your credit reports, the better.
My first new credit after bankruptcy was a People’s Trust Secured MasterCard. I had actually been using it less than a year and wanted to get my own cell phone on a contract. It’s with Fido, and they approved me, but with a $200 spending limit. That means my balance can never go higher than $200. They say that after one year of on-time payments, the spending limit comes off. Not bad for my first unsecured credit after bankruptcy. After a year of on-time payments with my secured MasterCard, I took a chance on getting financed for a new car. It was a bit of a challenge, but I got it. I just applied for, and found out I’ve been approved for another secured credit card – this time a Home Trust Visa. It wasn’t available to me when I lived in Quebec, but now that I moved to Ontario, it is.
That means I now have four items reporting to my credit reports: my cell phone account (open account), a secured MasterCard, car payments (and that’s an installment plan) and now, a secured Visa card. The credit cards are revolving credit. So I now have a nice variety of different types of credit, which is better than just having it all the same kind. I don’t have too much credit either, which can be a bad thing.
Start With Something… Anything… As Soon As You Can
Of course, take what you can get. If all you can afford is a $500 secured credit card, start with that. It’s better than nothing. As soon as you can, add more funds to get it to a more realistic limit of $1000 or $2000 at least. Everyone should be able to get at least some sort of credit after bankruptcy – at a minimum a Peoples Trust secured MasterCard since it’s available to all provinces and territories. Then, start using it and paying it. The nice thing is that secured credit cards report your timely payments just like unsecured credit cards!
Make Sure You “Clean Up” Your Credit Reports
At first, I spent a lot of time cleaning up my credit reports and working on obtaining credit after bankruptcy. But now that things are set in place and I have four items reporting to my credit reports, all I need to do is make sure I pay them on time and my credit score keeps improving. In fact, my Equifax score is now over 650 and TransUnion is just under 650. Right after bankruptcy they were both in the tank – sub 500 I’m sure, maybe even worse. I’ve watched my scores keep going up. For now, I won’t be seeking any new credit. I will let these items keep reporting to my credit profile and when they’re at the two year mark, I will apply for a mortgage.
And that’s why for now, I’ve decided to just “set it and forget it” so to speak. Of course, I will continue monitoring my credit reports and scores, but now that I have these four sources of credit reporting to my credit profiles, it’s time to just let some time pass. Patience is a virtue, especially when trying to get your life and your credit back on track after bankruptcy in Canada. But if you haven’t yet set up some sort of new credit after your bankruptcy discharge, don’t sit back and relax yet! Your credit won’t rebuild itself. Just leaving it alone for 6 years and living on a cash basis like you did when you were an undischarged bankrupt won’t help. Get at least one new form of credit and use it responsibly before you sit back in auto pilot mode.