Does Bankruptcy Negatively Affect Your Credit?
Temporarily your credit will take a hit when you file. However it is important to remember that the effects of your bankruptcy do not have to be permanent. If you take the right steps to rebuild your credit after bankruptcy, it will not be long before your credit score bounces back.
There are many ways to rebuild your credit after bankruptcy, including:
- Check your credit report annually and dispute errors
- If you don’t qualify for a credit card, apply for a secured card
- Create a monthly budget, and pay all of your bills on time
- Avoid utilizing a large amount of your available credit
#1: Review Your Credit Report Annually
Once you have completed the bankruptcy process, it is important to know exactly where you stand. Start by requesting a copy of your credit report from all of the major bureaus, such as Equifax, Experian and TransUnion. You are entitled to one free copy of your credit report each year. If you notice that any of these reports contain inaccurate or inconsistent information about your debt or payment history, you can and should dispute it.
#2: Start Using a Secured Credit Card
One of the most effective ways to rebuild your credit after bankruptcy is to start using a secured card—since you may not qualify for a traditional credit card. With a secured credit card, you would deposit money into a savings account and use this deposit to secure a line of credit. Your credit limit would then be the amount of the deposit, minus any fees. It is important to choose a card that reports to all three credit bureaus.
#3: Make All of Your Payments On Time
After filing for bankruptcy, it is imperative that you start paying your bills on time. Payment history makes up 35% of your credit score, so making on-time payments is one of the easiest ways to rebuild your credit. If you have a tendency to fall behind on your bills, you should create a monthly budget and stick to it. Now is the time to break bad financial habits. Sticking to a budget will also help you build up your savings. Request a free consultation with the Dallas Bankruptcy lawyers at our firm to find out more.
#4: Pay Off Your Balance Every Month
You may have heard that carrying a balance is good for your credit score, but that’s not necessarily true. If your credit score was damaged when you filed for bankruptcy, credit bureaus want to see that you are capable of repaying your debts. For this reason, you should get in the habit of only spending what you are able to repay at the end of the month. Paying off your balance each month is a good way to break the debt cycle.
