One of the concerns individuals have when considering filing bankruptcy is the effect it will have on their credit score. It is true that filing for bankruptcy lowers one’s credit score, but it does not have to stay low forever.
Although bankruptcy remains on your record for seven to 10 years, this does not mean it will take that long to rebuild credit. FindLaw discusses that, for many people, it is possible to see an improvement in credit during the first 12 to 18 months.
Pay unforgiven debts and expenses on time
You may have student loans that were not included in the bankruptcy, and it is important to pay your installments in full and on time. If you still have credit cards, aim to pay off, at minimum, 70% of your credit limit monthly, and pay them on time. Pay all other expenses, such as rent and utilities, on time, as this helps improve your score.
Get a secured credit card
USA Today discusses that one strategy to build up credit is to obtain a secured credit card. Unlike traditional credit cards, this kind requires that you pay a deposit, and this serves as your line of credit. Using the card helps build up positive payment history.
Make a budget
If you filed bankruptcy because of money mismanagement, it is important to make a budget (and stick with it) so you do not find yourself in the same position. Add up all sources of income and subtract your expenses. If the total is a negative number, you need to figure out how you can spend less, earn more or both.