One of the biggest concerns people who file for bankruptcy have is the impact it will have on their credit score and how they will rebuild their credit. The typical bankruptcy will remain on a person’s credit score from 7-10 years. However, a bankruptcy lawyer will share that the process of rebuilding credit doesn’t start once the bankruptcy filing is removed. The process can begin much sooner than this. Taking steps to make wise decisions and slowly rebuild your credit over time can start immediately after a bankruptcy is resolved. Here are some tips to keep in mind for rebuilding your credit score:
Keep a Close Eye on Your Credit Report
After bankruptcy, it will be vital that you continue to monitor your credit for several reasons. You will want to ensure that it reflects zero balances on the accounts that have been discharged to ensure that creditors are not continuing to report negative information. It should be your top priority to make sure that your credit report does not contain any inaccuracies.
Consider a Secured Credit Card
One of the best ways to rebuild credit is to have a credit card to make payments on. A secured credit card may be a reliable option as you will likely have to pay a deposit. This deposit is typically your credit line. Over time, these cards can help improve credit but be aware that they may have higher interest rates. Use this as an opportunity to rebuild credit and practice good financial health. It may be a good idea to pay the card in full each month for any purchases that have been made.
Continue Making Timely Payments
Not all debts are discharged in bankruptcy, and continuing to make timely payments to those accounts will be critical when rebuilding your credit. If you still have a mortgage payment or student loan debt, those payments need to be made on time. Failing to make payments can have a negative impact on your credit score.
Make Wise Financial Decisions
If you filed for bankruptcy, chances are you found yourself in over your head with debts that you were unable to pay. For someone who has made poor financial decisions in the past, it’s essential to educate yourself and make changes to how you managed your finances in the past. You must be careful not to rack up more debt. Make smart financial decisions by making payments on time and trying not to carry over any balances on new cards from month to month.
How Bankruptcy Impacts Your Credit Score
The impact bankruptcy has on your credit score will vary depending upon your credit score at the time you filed. A good credit score can plummet as much as 200 points. However, it’s essential to be aware that if you are in a situation where you are filing for bankruptcy, it’s likely that your credit score is already low. This is especially true when you have defaulted on loans or failed to make credit card payments. Additionally, the impact on your credit score could depend on whether you filed for Chapter 7 or Chapter 13 and the amount of debt that was discharged from filing.
While the idea of filing for bankruptcy can seem bleak, it’s important to take control of the situation so that you can begin the process of rebuilding your credit. If you are considering bankruptcy and whether it is the right option for you, consult with a lawyer, like a Chapter 13 bankruptcy lawyer for support.