There’s no getting around it – while bankruptcy provides relief from debt and the chance at a fresh start, it isn’t without its setbacks. Depending on which chapter of bankruptcy you file, it can remain on your credit report for seven to 10 years. In addition to this penalty, most people could see their credit score drop between 160 and 240 points.
While this can seem troubling, the reality is there are steps you can take almost immediately after filing for bankruptcy to start rebuilding your credit score. Seven to 10 years may feel like a long sentence, but you can offset its impact quickly using these proven strategies to raise your credit score:
Carefully monitor your credit reports
Before you start rebuilding your credit, you should ensure your credit report is free of any errors or missing information after filing for bankruptcy. Inaccurate information could cause a low credit score, and you’ll want to make sure all of your debts are appropriately discharged to start off on the right foot.
Get a secured loan or credit card
One of the initial setbacks of bankruptcy is you may not qualify for traditional loans or credit cards. If you do qualify, you’ll likely have to deal with lower limits and higher interest rates until your credit score improves. However, there are financial tools available that can help you rebuild credit. A secured credit card or loan usually requires an upfront deposit as collateral and has high-interest rates but can be very useful until you are eligible for an unsecured loan or credit card.
Build up an emergency fund
Even if you stick to your budget after filing for bankruptcy, an unexpected expense or emergency can quickly get you back into trouble if you’re not prepared. Setting aside money for emergencies can help you avoid having to rely on using your credit cards or quick payday loans to cover the costs.
Ultimately, the key to bouncing back after bankruptcy is financial responsibility. By creating and sticking with a budget, making your payments on time and monitoring your credit, you will be in good financial standing before you know it.