Filing for bankruptcy is a big decision. Many people may suffer financial hardship for a variety of reasons, from costly medical bills to job loss, and can find themselves looking for debt relief through filing bankruptcy. While filing is a freeing in some ways, such as not having to worry about bill collectors calling during dinner, or while you are at work, it can also mean taking a setback to your credit score. Although the thought can seem a bit scary, it isn't the end of the world and it is possible to rebuild your credit after bankruptcy.
Taking the first steps
Your credit report shows a bankruptcy for ten years after you file, but that doesn't mean you are stuck with a cash only life during that entire time period. You can take steps to rebuild your credit within a few months, and if you make the right decisions, you'll notice your credit score start to rise. Here are a few things you can do:
Open and maintain stable bank accounts
Some of the first accounts you'll be able to open are basic checking or savings accounts. Make sure to keep these accounts in good standing, and do not allow them to become overdrawn.
Embrace new credit card offers
Often, credit cards offers can start to roll in within a year after bankruptcy. Many cards are designed for those who are rebuilding credit. Several of these use a preapproval system that can keep you from applying for a card in vain and have an inquiry with nothing to show for it. Interest rates on these cards will likely be high, and credit limits may be low. Look for a card that has a low annual fee, and pay your balance in full every month.
If you aren't approved for a regular card, you may still be able to get a secured credit card where the limit is equal to your deposit. Although it feels like you are sending in hundreds of dollars for someone else to hold, the fact that the company is reporting to the credit bureaus makes it worthwhile for many. If you keep your account in good standing, there's a chance the credit card company will refund your deposit in the future. Check the terms to review the policy.
Consider a store or gas card
For some, it is easier to stay disciplined with a card that has a more limited list of spending options.
Keep an eye on your credit report
As you begin to work toward rebuilding your credit, you may see your credit score fluctuate up and down. Eventually, it should continue to move up.
Don't rush it
As you are working to improve your credit, there may be times of frustration. You may miss the lower interest rates and higher credit limits, and you may be tempted to apply for better cards. While you want a couple of cards to show you can handle them, too many inquiries can hurt as well. If you get credit cards, it can be tempting to start making larger purchases. Try and subdue this instinct as much as possible. If you do charge something larger, form a plan to pay the bill within a few months to limit interest charges.
If you are swimming in debt and don't see a way out, a drop in your credit score can seem daunting, but it doesn't have to be. The time following a bankruptcy calls for a period of adjustment as you start over, but it also gives you the opportunity to take things slow and make good decisions as you build a better financial future. If you are considering bankruptcy and have questions about how it can impact your credit score or how to rebuild credit after bankruptcy, contact the Law Office of Robert C. Nisenson L.L.C. at 732-518-8038.