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:
When you file for bankruptcy, it can have a very traumatic effect on you. The process of bankruptcy is such that the fact remains on your credit card report for a period of 10 years. Besides this, it can also lead to social isolation from your peers. Being branded bankrupt can have a very negative impact on your personality as well as your character, which need not always be the right perception. But through it all, bankruptcy is something that you can overcome.
One of the first things you need to do is to come to terms with the fact that you have declared bankruptcy. Once done, you have to face all the consequences that come along with it. There are several psychological aspects that get related to declaring bankruptcy. For one, you may retain the fear of purchasing anything at a retail store or from indulging once in a while. For some other integrating back into society can be difficult, leading to a lack of a social life. You first have to accept that the episode is over and done with and you need to move on. It is a learning experience and a lesson that you will adhere to for the rest of your life.
After bringing yourself back to reality, the next step is to work on your credit score. Once declared bankrupt, your credit reports will be a mess for a decade. You need to slowly work at fixing it. You have to work on aspects that will improve your credit rating. If you are looking for a loan, try approaching those lenders who take into account your credit rating for a short while prior to handing out the loan. A financial advisor or some serious Internet browsing is what can help you work on your credit scores.
The minute you are approved for a credit card or for a bank account, know your payment schedules well. Make written notes of them if necessary. Keep an accounts diary to track where you are using the card and how much you have spent. Knowing where the money goes, helps you keep a closer watch on your expenses. You will be able to monitor your spending habits this way. When you receive your bill, pay more than the amount due. This move will be noticed by the credit service. You can also make use of options such as standing orders or direct debts to ensure that you do not miss a payment date at all.
About the Author: Brian Joneta also writes about Bankruptcy and Credit issues including Declaring Personal Bankruptcy and Bankruptcy Lawyer