There are no two ways about it: filing bankruptcy is likely to take a toll on your credit score - but with the right approach, the damage can be temporary. By taking deliberate steps to improve your credit score after bankruptcy, you may find yourself back on your feet again sooner than you expected.
How can bankruptcy help me restore my credit score?
When you are in debt and cannot afford to keep up with your payments, every late or missed payment takes a chip out of your credit score. As late fees and interest build up, this problem can grow worse and worse over time, resulting in a downward spiral for your credit score. By interrupting this vicious cycle and giving you a chance to start over debt-free, bankruptcy can be the first step in helping you establish good credit again from the ground up. Although it takes time, patience and planning, it is entirely possible to raise your credit scores again after bankruptcy.
Check your credit report
One of the first things to do after bankruptcy is to request copies of your credit reports. You should review your reports carefully and check them for errors or inconsistencies. If you find any problems with your reports, it is important to have them resolved, since they may be negatively affecting your credit score.
You may wish to have your bankruptcy lawyer help you with this process; he or she can help you interpret your credit report and identify any errors it may contain. If there are problems with your report, your lawyer can work on your behalf to have them resolved.
Pay your bills on time, every time
Your credit score is based largely on your payment history, so it is important to pay all of your bills on time - especially when trying to rebuild good credit. One way to help ensure that your bills are paid on time is to set reminders for yourself, for instance on your smartphone or calendar, or to set up automatic payments.
However, if you choose to use automatic payments, be aware that it may take one or two billing cycles for the automatic payments to kick in. Therefore, you should keep a close eye on those accounts, especially at first, and continue to make manual payments as necessary until the automatic payments go into effect. Otherwise, you may risk missing a payment without realizing it.
Use credit - carefully, of course
Although it can seem scary to someone who has just been through bankruptcy, another important part of improving your credit score is to begin using credit again once you feel comfortable doing so. Of course, it is important to start small and never borrow more than you can afford to pay back. In fact, it is a very good idea to make a habit of paying off your entire balance every month to avoid going back into debt.
At first, it may be difficult to find credit on good terms after bankruptcy, but it is important to shop around and not jump at the first offer you receive. As you continue to establish good spending and repayment habits, it will likely become easier to obtain credit on more favorable terms.
Talk to a bankruptcy lawyer for more information
If you are struggling with debt and would like more information about bankruptcy and whether it may be an option for your specific circumstances, schedule a consultation with a bankruptcy law firm in your area.