Re-establishing your credit rating after declaring personal bankruptcy can be difficult, but it’s not impossible. Your goal is to manage your money, avoid future bankruptcy, and restore your credit rating. Meet these goals by making, and following, a credit plan.

Live within your means

You must make a plan to avoid having to file for bankruptcy again. The good news is that a good plan can help you live within your means.

First figure out your income. Then figure out your fixed expenses—such as rent or mortgage payments, and utility bills. Now figure out your variable expenses—such as gas, and groceries. Now set up a budget. There are several free computer programs which can help with this, or your bank may have one.

Make sure you include every expense. Be realistic—you might include a small entertainment budget. But it’s crucial that you include a savings plan in this budget.

You must stick to this budget.

Pay all bills on time

Now you have your budget, you can allocate money for your bills. Make sure you pay them on time. Late payments will damage your credit. Late payments are recorded on your credit report.

Never allow your bills to go to collection.

Get a secured credit card

A secured credit card is often the first credit card you can get after bankruptcy. You must put up the money against your credit limit, and make sure you pay it off every month.

Use your credit card once or twice a month to re-establish your credit rating. Secured credit cards are treated just like normal credit cards by the rating agencies.

Secured cards often have fees attached to them, so make sure you research this in advance.

Beware of scams

There are a lot of unscrupulous agencies offering credit cards and credit schemes. Do not be fooled. Use your bank or credit union to set up your secured card. Avoid online offers which seem too good to be true, because they are.

Understand the timetable

Many people think it takes 7 years to re-establish a good credit rating. This is a myth. Your bankruptcy will adversely affect your credit score until it is removed from your credit report. However, many things can be done to improve your credit score during this 7 year timeframe.

Making a plan, and sticking to it, will see your credit rating restored.