Navigating the bankruptcy process can be confusing and turbulent at times. While it is an effective tool to get out from overwhelming debt, you must manage certain consequences. For example, bankruptcy negatively impacts your credit score. However, this is not irreparable damage by any means.
Having a low credit score is not a permanent outcome of bankruptcy. There are simple steps to repair your credit and get your financial health back on track.
1. Check for and dispute credit score errors
Make sure you regularly assess your credit report. Credit reports are not always perfect. Keep an eye out for any mistakes regarding the bankruptcy filing date and balances of discharged accounts. Also, check to see that discharged accounts are reported as such. Dispute any inaccuracies you find to improve your standing.
2. Consider a secured credit card
Declaring bankruptcy may impact your purchasing power, but you can regain it. One option for restoring your credit score is getting a secured credit card. This type of card relies on an upfront deposit as collateral. The limit of a secured card is generally the amount you deposit.
3. Think about a retail credit card
Another method is applying for a credit card from a retail store. These cards are generally easy to obtain because of their loose requirements. However, many retail cards have significant penalty fees and high interest rates.
4. Become an authorized user on another credit card
If you have a close family member or friend willing to help you recover from bankruptcy, you may inquire about becoming an authorized user on his or her credit card. This option may not lift your score dramatically, but it will help you in increments if done correctly.
5. Consider a credit-builder loan
A credit-builder loan is self-explanatory. It is a loan that assists you in rehabilitating your credit. This loan puts the proceeds into a savings account until you make all payments instead of giving you money right away. Once the loan term ends, you can collect the cash.