It is no secret that Americans have faced economic challenges in the last decade, especially in light of the Great Recession which led to millions of foreclosures across the nation. While it is safe to assume that the majority of these folks were not eager to file for bankruptcy, it is important to understand that bankruptcy is not a financial death sentence.
When you file for bankruptcy, it will have a negative impact on your credit score, however, many people who file for bankruptcy already have collections on their credit, and are 30, 90, 120 days late or more on their accounts. That said, their credit has likely taken a significant hit before the bankruptcy.
You Can Take Steps to Improve Your Financial Health
We have good news for you: Filing for bankruptcy does not mean that your financial career is over. There are steps that you can take right now that can help you start rebuilding your credit, and eventually your overall credit rating.
The first goal is to rebuild your FICO credit score, and something that you can do immediately is get a copy of your credit report and check for errors. If there are errors, you can file disputes with the three credit bureaus.
You will also want to follow these steps:
- Be sure to pay all of your bills on time.
- Open a new bank account so you can start with a clean slate.
- Get a secured credit card, and pay it off in full each month.
- Get a gas or retail card, and pay it off every month.
- If you have an auto or student loan that survived bankruptcy, pay them off monthly.
- Search for a credit card online. We recommend getting a card with a low, or zero annual fee. Then, pay off the balance each month.
- Continue monitoring your credit score on a regular basis.
It is not unusual for people to swear off credit cards after filing for bankruptcy, but it is important to understand that credit cards are essential to rebuilding your credit score. You can easily put a regular purchase such as gasoline, or groceries on a credit card, and then pay it off each month.
Remember to be patient during the process. While bankruptcy stays on your credit report for 10 years, it is possible to achieve a credit score in the 700s well before that time. In order to accomplish this, you will have to play a proactive role and the sooner you begin, the sooner you can bounce back from bankruptcy.