By the time you decide to file for bankruptcy, your credit score has probably already taken a major hit. Bankruptcy will only exacerbate your existing credit issues. It is common for people’s credit scores to drop by 200 points or more following a bankruptcy filing.
Of course, the effect of bankruptcy is temporary, and you can start increasing your credit score shortly after the courts grant you your discharge. What are some of the tactics people employ to improve their credit scores following a bankruptcy?
They get secured credit cards
The companies that offer revolving lines of credit make the most money off of people who carry balances, forget their payments and go over the limit on their accounts. Someone who has just filed for bankruptcy is a perfect candidate in the eyes of a credit card company. They won’t qualify for bankruptcy again for years, and they likely will have no revolving lines of credit anymore.
Although a secured credit card usually means paying a deposit, having a low credit limit and being subject to a higher-than-average interest rate, you will be able to start rebuilding your credit history quickly.
They only borrow what they can repay in the same month
One of the ways that people get into trouble with revolving lines of credit is that they overextend themselves. They spend more than they will make in the next 30 days, and then they think that they will budget their way out of the problem later.
Instead of borrowing from your future income, use your credit card for a few small expenses each month and pay the bill off completely. Not only will you save money, but you will establish a very positive credit history with on-time payments.
They keep an eye on their credit reports
There are numerous free services that allow you to track your credit score. From apps that provide you with monthly updates to free credit reports available annually from the credit bureaus, there are numerous tools that can help you track your credit score and verify when it starts to improve.
You will be able to quickly address any blemishes and have them removed from your report. Seeing your score creep up month after month will also motivate you to continue with your intelligent credit habit.
Focusing on your future financial stability can help you make the most of a personal bankruptcy filing and quickly rebuild your credit afterward.