Is There Hope For My Credit After Bankruptcy?

Bankruptcy can be a great tool to use to help you get back on your feet financially. However, going through a bankruptcy can be a very traumatic event, both emotionally and financially. Your confidence in your ability to function financially may have been shaken and you may be wondering if there is any hope for your credit after this bankruptcy. The good news is that you can establish good credit again and there will even be lenders willing to loan money to you in the future.

First, you need to realize that bankruptcy does not affect your credit forever. Your credit reports will show your bankruptcy for 10 years. Also, late payments and debts that go to collection remain on the reports until seven years after the delinquencies. A Chapter 7 filing wipes out debts, but it doesn’t wipe your credit reports clean.

Of course, if you immediately start managing your finances better and paying your bills on time, the bankruptcy will have less and less bearing on your credit score as the time passes.

Rebuilding your credit after bankruptcy is possible. Though it will take you time to raise your credit score, you can create a brighter financial future for yourself. This is one situation where being proactive truly pays off.

Start Small

After filing for bankruptcy, you’ll probably be eager to raise your score, and that’s certainly a good thing! However, be careful to avoid getting in over your head. Instead of taking on new loans in an attempt to prove your “worthiness” as a borrower, set yourself up for success with careful planning.

Focus on the following strategies:

  • Create a budget that accounts for your monthly expenses and long-term financial goals. (Notes from your pre-bankruptcy credit counseling classes are a great place to start!)
  • Build an emergency fund. We’ve all heard that we should have 6 months of expenses set aside. Start setting aside a couple hundred dollars a month where you can, and adjust your budget accordingly.
  • Dispute any errors on your credit reports.
  • Track your credit score each month from the same source.

After you have built up emergency savings and established a workable budget, it’s time to take a look at credit options. In order to rebuild your credit, you’ll need to focus on secured loans and credit cards instead.

While you may not qualify for a normal credit card immediately afterwards, you can obtain a secured credit card to start with. This means that you must first deposit a certain sum of money as collateral for your credit expenditures. Resist the urge to charge more than you can afford to repay at the end of the month.

Another important way to reestablish your credit is with some sort of installment debt. These types of loans might include student loans, mortgages, or car loans. If you have any existing installment loans that were not discharged by the bankruptcy, you should start with these and be very careful to always make your payments on time.

Rebuilding your credit takes planning, patience, and persistence; as you rebuild your credit do everything you can to avoid late payments and high balances.  Through the use of effective credit rebuilding techniques, you may be able to increase your odds of getting approved for new and better credit in less time. Just keep in mind that no solution can work overnight.

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