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Low-limit credit card no answer to establishing credit

Dear Dave: A while back I filed Chapter 7 bankruptcy. Then, not long ago I saw an article saying the best way to re-establish credit after a bankruptcy is to find a low-limit credit card, make small purchases, then pay it off early each month. I'd like to buy a home in a few years, so what do you think of this advice?

-- Kim

Dear Kim,

That's just about the worst advice I've ever heard. People file bankruptcy because they got themselves so far into debt they couldn't get out. If debt has already pushed you into bankruptcy, then don't you think debt is something you should avoid? Whoever wrote that article is a real bozo!

First of all, don't worry about re-establishing your credit. If you go three or four years after bankruptcy without borrowing a dime, then you'll add no new entries to your credit bureau report. This will help show a potential mortgage lender that you learned from your mistakes the first time around. The definition of insanity is doing the same thing over and over and expecting different results. Getting another credit card after all you've been through would be really dumb.

You can't borrow your way out of debt or into wealth, Kim. If you want to see different results you'll have to change your behavior!

- Dave

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