&l;p&g;&l;img class=&q;dam-image shutterstock size-large wp-image-1055123204&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/1055123204/960×0.jpg?fit=scale&q; data-height=&q;630&q; data-width=&q;960&q;&g; Shutterstock
In 2017, more than 700,000 people filed for bankruptcy. A bankruptcy can remain on your credit report for up to ten years, depending upon the type filed. You do not have to wait ten years for the sting of bankruptcy to be removed. A study published this week by &l;a href=&q;https://www.lendingtree.com/bankruptcy/the-cost-of-bankruptcy/&q; target=&q;_blank&q;&g;LendingTree&l;/a&g;&a;nbsp;looked at&a;nbsp;loan terms offered to more than one million LendingTree users during 2017. It found that:
&l;/p&g;&l;ul&g;&l;li&g;After just two years, 65% of people who filed bankruptcy had a score of 640 or higher&l;/li&g;
&l;li&g;After three years, people who apply for a mortgage with a bankruptcy on their record paid only 19 bps more than people with no bankruptcy&l;/li&g;
The LendingTree data confirms what I have experienced during my career in consumer banking: if you have a plan and behave responsibly, you can recover from bankruptcy quickly. If you have filed for bankruptcy, here are three steps you can take to ensure a rapid recovery.
&l;strong&g;1. Year 1: Use A Secured Credit Card To Build Credit&l;/strong&g;
Once your bankruptcy is discharged, open a secured credit card. Typically you can find a secured card that does not charge an annual fee. Shop for secured cards online at sites like &l;a href=&q;https://www.nerdwallet.com/best/credit-cards/secured&q; target=&q;_blank&q;&g;NerdWallet&l;/a&g; or &l;a href=&q;https://www.magnifymoney.com/blog/building-credit/best-secured-cards-2014/&q; target=&q;_blank&q;&g;MagnifyMoney&l;/a&g; (where I work).
With a secured card, you must provide a deposit. Your credit limit will be assigned based upon your deposit amount. For people who just recently filed bankruptcy, do not expect your credit limit to be much higher than the amount of your deposit.
During the year, make sure you put at least one charge per month on the card. Ideally, you should ensure that the charge is not more than 20% of your available credit. Consider setting up a monthly recurring expense (like Netflix, for example) on your secured card. When you receive your statement, make sure you pay the balance in full and on time every month.
Using a secured card in this way is important for a few reasons. The low utilization sends a signal that you are responsible and will not be maxing out available credit. The on-time payments demonstrate that you are a good credit risk.
&l;strong&g;2. Sign Up For A Free Credit Score / Credit Monitoring Service&l;/strong&g;
Consider signing up for a free credit score service like &l;a href=&q;https://www.creditkarma.com/&q; target=&q;_blank&q;&g;CreditKarma&l;/a&g; or &l;a href=&q;https://my.lendingtree.com/&q; target=&q;_blank&q;&g;MyLendingTree&l;/a&g;. With these services, you can keep an eye on your credit report to ensure that you are not the victim of identity theft. In addition, you can watch your score evolve and receive offers from creditors as your score improves.
Once your credit score reaches 700 or higher, you will start to receive mainstream offers. Your goal should be graduation from a secured credit card to a standard no-free credit card. But your objective should remain the same. Once you have the standard credit card, keep your utilization low. Make your payment on time every month. Never borrow money on a card and watch your score improve.
&l;strong&g;3. Remember Why You Filed Bankruptcy In The First Place&l;/strong&g;
To avoid bankruptcy in the future, make sure you understand how you became bankrupt in the first place. For some people, a loss of job or unexpected medical expense might have been the culprit. But for many others, chronic over-spending is the core issue and needs to be addressed. Create a written budget. Make sure you are living within your means. And if you can&s;t trust yourself with a credit card, don&s;t carry one with you. You can easily set up recurring monthly charges and automated monthly payments. That removes temptation but ensures you build your score over time.
Within just a few years, your responsible behavior will be rewarded with&a;nbsp;a good credit score. That score can help you obtain good mortgage offers and lower insurance premiums.&a;nbsp;Just make sure you don&s;t use your improving score to go deep into debt once again.