Many people worry that pursuing bankruptcy will permanently and irreparably damage their credit. While it is true that bankruptcy does have a negative impact on your credit, it does not have to be that way forever. In fact, bankruptcy does have some immediate positive effects. First, discharging debt lowers your debt-to-income ratio nearly immediately. Second, once you complete a bankruptcy, you typically cannot file another bankruptcy for at least six years. This can make you look more secure to lenders, as there is little chance your debt will be discharged again.
Improving Your Credit Score and Rebuilding Your Life
A bankruptcy will remain on your credit report for up to 10 years, but that does not mean your credit rating must suffer that entire time. If you take the right steps, you can improve your credit and find success after bankruptcy. We suggest these following these five tips:
- Go to credit counseling. Often, credit counseling is required as part of your bankruptcy. If it’s not, it’s a good idea to take part in a course anyway. They are very affordable and can offer practical, useful tips to help you better understand and manage your finances.
- Start saving. After a bankruptcy, your debts will have been greatly reduced or eliminated entirely. Without the burden of paying those monthly bills, you should be able to begin to save money. This is both a good habit and can help you in the future if you run into unforeseen problems. Rather than spiral into high debt, you can address the issues with your savings.
- Avoid credit repair agencies. Unfortunately, some businesses will claim they can remove the bankruptcy from your credit report or offer some other fix for a fee. There is nothing that these companies can do for you that you cannot do yourself. Simply check your score regularly and make sure to address any errors you may find.
- Get a secure credit card. The only way to build credit is to use credit wisely. A secure credit card offers a chance to use credit with low risk. You obtain the credit card with a deposit to the bank. The bank will allow you to use the card for the amount of your deposit. This eliminates the risk and temptation to spend more than you can pay. While these cards can require fees and come with high-interest rates, the goal is to use this card for a short time.
- Go slow. It may feel like an insurmountable task, but rebuilding your credit after a bankruptcy is possible if you are careful and thoughtful. Do not attempt to obtain too much credit too quickly. This both scares off lenders and can create a higher risk of running into financial trouble again.
Concerns about your financial future are valid and stressful, but they can be managed. Contact us today to learn more about your legal options.