Congratulations! You’ve successfully served your three year period of bankruptcy and have been discharged, so what now? You’ve undoubtedly taken the most appropriate steps to deal with your financial issues by filing for bankruptcy, and all your debts are well behind you now. Having said this, there’s still a lot of work required to get your finances back on track. The most significant issue that discharged bankrupts experience is their capability to borrow money, and the reason for this is their bad credit rating.
For the last three years, you’ve had no debts to repay so your credit history has nothing to show other than a bankruptcy mark against your name. There’s been no activity on your credit report, so a blank page will make banks and lenders hesitant in lending money to you purely because they can’t analyse your repayment behaviours. Rebuilding your credit rating is the best way to get your finances back on the right track, and make your recovery process as seamless as possible.
Ways to repair your credit report after discharge?
Given that lending institutions haven’t been able to ascertain your financial management skills for the past three years, you will need to start presenting healthy financial habits. Here’s a list of ways in which you can do this
1. Stable employment
Obtaining regular and ongoing employment is an excellent way to increase your financial security and display to lenders that you have a regular source of income. Steady employment will enable you to increase your savings and enhance your overall financial circumstances, leading to a better credit rating.
2. Increase your savings balance
Your savings account is an asset, so increasing your savings balance as time go on will illustrate to financial institutions that you are financially reliable and are capable of making loan repayments. By transferring money into a dedicated savings account each month, even a small amount, will improve your credit rating.
3. Limit your credit applications
Each time you make an application for a line of credit, it is documented on your credit history, so too many credit applications can adversely impact your credit rating. After being discharged, it’s crucial that you are practical and careful about the types of credit you apply for to increase your chances of approval. It’s best to apply for just one line of credit at a time, and bear in mind that secured loans and options with a guarantor or joint accounts will increase the probability of approval.
4. Contemplate a term deposit
If you’ve been able to save money during the course of your bankruptcy period, think about putting part of it into a term deposit account. Not only will you accrue interest and improve your overall financial circumstances, it will also show loan providers that you are financially reliable. Therefore, the likelihood of securing 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 unquestionably improve your credit rating and increase the confidence that financial institutions have in your financial management capabilities.
6. Don’t hesitate to talk to financial institutions
If you intend to request a line of credit after your bankruptcy period, or uncover what types of options are available to you, don’t be afraid to speak to lenders or other financial institutions to discuss your circumstances. They are in the best position to advise of your eligibility, and offer guidance on what options would work best for your individual situation.
Be mindful of credit repair agencies
There are a number of credit repair companies that will make all kinds of promises to improve your credit report. Whilst some of them are helpful in disbuting any incorrect listings on your credit record, 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 because they “may not always be able to do what they claim they can”.
If you’re in need of any support in rebuilding your credit history, or have any questions with respect to your recovery process after bankruptcy, it’s always best to seek advice from qualified professionals. Reach out to Bankruptcy Darwin on 1300 818 575, or alternatively you can visit our website for additional information: http://www.bankruptcy-darwin.com.au/