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Sunday, March 4, 2007

Building your credit after bankruptcy

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What's the right thing to do in order to rebuild your credit after bankruptcy? What's critical is to show a consistent payment history on your remaining debts. Making payments on time is important, and automatic bill payments ensure that happens.

Consider getting a secured credit card to help boost your credit score. You want to make sure that the card provider will report your payment history to the credit bureaus, not all secured cards do, and you want a card that only allows you a line equal to the secured deposit. I'd recommend the secured card to improve the mix of accounts on your credit report.

If you're worried about your ability to control spending with a credit card, and a secured card puts a limit on that spending. If the idea of a secured card bothers you, then wait a year or two until you've gotten more comfortable with living within your means and paying for purchases on a cash basis.

To the extent that you can pay down the balance on your outstanding line of credit, it will help you when you go to finance the addition. Depending on where rates are and your credit score, you'll choose between a home equity line, home equity loan or a cash-out refinancing to pay for that addition


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