Once you’ve filed bankruptcy, your credit score will typically bottom out at more than 200 points below where it was before you filed, but there are times when an individual simply has no other viable option than the financial and personal relief offered through a bankruptcy filing. Almost immediately, creditors stop harassing you, foreclosure proceedings stop, repossessions stop… you have time to breathe, step back and figure out exactly what to liquidate, pay off, and discharge in order to get the fresh start you so desperately need.
However, once the bankruptcy is discharged, what can you expect in terms of regaining some financial footing?
Contrary to popular belief, it really doesn’t matter where your credit score was before your bankruptcy filing, nor does it matter whether your credit report contained negative information or not (most people who end up filing bankruptcy DO have negative information and bad credit by the time they actually file), what will matter the most after your filing is the length of time that passes once it is on your credit report. Bankruptcy references remain on your credit report for seven years, and the more time passes, the easier it will be to improve your credit score. And once that seven years passes? You’ll start to see those things drop off your credit report, and assuming you’ve not added any further negative marks to your score, you should see a significant increase in your credit score.
But what can you do to improve your score before the seven years passes?
Even though it may seem impossible, you can actually begin to rebuild your credit almost immediately by working with companies that offer secured credit cards, small installment loans, or catalog shopping accounts (such as a Fingerhut Credit Account issued by WebBank). Many of these creditors specialize in working with those of us with less than perfect credit, offering special “fresh start” style programs designed to help rebuild credit. Once you’ve opened such an account, make sure you make your payments on-time, every time, and keep your credit utilization below 30%, and in a few years, your credit score could be as high as 700 or more.
While it may seem like it at the time, bankruptcy does not ruin have to ruin your credit forever, you just have to make sure that you use the “fresh start” that bankruptcy provides wisely by practicing good financial habits and working to rebuild your credit.
Here are a few options to consider when you’re ready to start rebuilding your credit, whether you have a bankruptcy or not: