Bankruptcy is a legal process that usually eliminates debt and provides an opportunity for a fresh start. One of the best ways to take advantage of that opportunity is to rebuild your credit score.
In the time before a bankruptcy, people are usually not paying their loans on time, and consequently, they have a bad credit score. The bankruptcy filing stops the score from getting worse, but rebuilding credit takes effort.
Why is your credit score so important?
A good credit score can help you rebuild your financial life and make some things easier for you. A good credit score can:
- Help you get a job
- Get a rent or mortgage approval
- Get utility services without excessive deposits
- Get lower interest rates on loans and credit cards
- Get better rates on insurance policies
What factors affect your credit score?
A good credit score requires a history of on-time payments on loans and credit cards. The credit reporting system rewards people who reliably repay monthly debt with higher scores.
Additionally, the older the loan or credit card you make payments on the better. A long history of borrowing and repaying money can also increase your score.
How can you rebuild your credit score?
These four options give you ways to get current loans onto your report to help you begin to rebuild your credit:
- Reaffirm a car or house loan during your bankruptcy to keep it on your report
- Take out a new car loan
- Open a secured credit card
- Become a signer on a family member’s existing credit line
Mindfully improving your credit score after bankruptcy is the best way to take advantage of the fresh start that bankruptcy affords.