How to improve your credit score after bankruptcy
Most people don’t pay much attention to their credit score, which is easy to do when you’ve always been able to pay your bills on time and haven’t taken on a lot of debt. But even the most responsible consumers can be affected by unforeseen circumstances, such as job loss or medical bills. Credit cards can float expenses for a while, but eventually debt can build up to a point where payments are no longer manageable. Missed or late payments can lower your credit score, but you can avoid bankruptcy, hoping to stop any further damage. However, sometimes bankruptcy is the right choice, and there are things you can do to rebuild your credit score after filing.
Your credit report
If you have a pattern of late payments, filing for bankruptcy can discharge many of your unsecured debts and put an end to those late payments. A bankruptcy will lower your credit score, but after you file, you will be given a “Debtor’s Discharge” document showing that your debt has been forgiven. At this point, negative credit events stop and you can begin to build a positive credit history. First, you’ll need to order credit reports from all three credit reporting agencies: Equifax, Experian, and Trans Union. Please review all information included in your report to ensure accuracy, particularly that any debt included in your bankruptcy shows a zero balance. You can correct any errors by contacting the credit bureau.
Reconstruction
After making sure you have a clean credit report, you can start adding positives. You will most likely receive credit card offers as soon as your case is settled, but be sure to review the terms carefully before accepting. You may need to start with a secured credit card with high interest rates and high fees. While this isn’t ideal, it’s a place to start, and you can avoid paying interest by making only small purchases and paying them off in full, on time each month. You can even use the credit card for a small monthly bill and set up an automatic payment, basically ignoring the fact that you have access to credit to avoid the temptation to overspend. As time goes on, you’ll receive better offers on new credit cards or you may be able to renegotiate the terms of your current card. Soon, your credit score will improve and you will qualify for better and better options.
going forward
Like most negative events in life, ignoring your credit will not result in better circumstances. It is best to be fully informed about your financial situation and take direct steps to make changes. If you have debt that you think you’ll never be able to pay off, the first step is to determine if you can revise your budget to get back on track. If this is not possible, let me help you explore your bankruptcy options. After making this bold move, opportunities to rebuild your credit will present themselves and you will bounce back.