Improving 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 acquired 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 may be able to cover expenses for a while, but eventually the debt can grow to the point where the payments are no longer manageable. Missed or late payments can lower your credit score, but you can avoid bankruptcy by 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 bankruptcy can discharge many of your unsecured debts and put an end to those late payments. Bankruptcy will lower your credit score, but once you file, you’ll be given a Debtor’s Discharge showing that your debt is forgiven. At that point, the negative credit events stop and you can start building a positive credit history. First, you’ll need to request credit reports from the three credit reporting agencies: Equifax, Experian, and Trans Union. Review all the information listed on your report to make sure it’s accurate, especially if all the debts included in your bankruptcy show a zero balance. You can correct any errors by contacting the credit agency.
Once you’re sure you have a clean credit report, you can begin the work of adding positives. You will most likely receive credit card offers as soon as your case is resolved, but be sure to review the terms carefully before accepting. You may have 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 only making small purchases and paying them off in full, on time each month. You may even want to use the credit card for a small monthly bill and set up automatic payment, essentially ignoring the fact that you have access to credit to avoid the temptation to overspend. Over time, you’ll get better offers on new credit cards, or you may be able to renegotiate the terms on your current card. Soon your credit score will improve and you will qualify for better and better options.
I’m moving forward
Just like most negative events in life, ignoring your credit will not improve your circumstances. It is best to be fully informed about your financial situation and take direct action to make changes. If you’re in 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 that’s not possible, let me help you explore your bankruptcy options. Once you make this bold move, opportunities to rebuild your credit will emerge and you’ll be back on your feet.
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