bankruptcy

Bankruptcy is a low point in anyone’s financial life and it’s natural to feel a little in despair. Most people fear that they will never be the same again financially and that their credit rating will never be good enough to buy the things they want and need. Others fear that they will always carry a mark of shame for having gone through bankruptcy. Nothing could be further from the truth. Bankruptcy is simply a financial tool and, when used properly, can be a great opportunity to rebuild your credit and get your financial life in order.

Bankruptcy’s Impact On Your Credit

The immediate negative impact of a bankruptcy is a sharp drop in your credit score. How far you fall depends on where you start, but a drop of 250 points on your FICO score is not unusual. This means that you will be treated as an unfavorable borrower and be subject to higher interest rates than you’re used to. The first step to recovery is to find out how bad your credit rating is by getting the scores from the big three credit reporting agencies: Experian, Equifax, and TransUnion. If there are errors on your report, you can get them removed and raise your scores a bit.

Good News After Bankruptcy

The good news is that no matter how low your score is, you may not have trouble actually getting credit. Since you can only declare bankruptcy once every eight years, at least a lender knows you won’t be declaring bankruptcy again for awhile. For that reason, you may actually find that you are bombarded with credit card offers after bankruptcy, although the interest rates may be quite high. This may sound like a recipe for disaster since credit cards are likely what caused your bankruptcy in the first place.

Secured credit cards are often the safest way to go to avoid getting into credit problems again and getting one of them and paying it on time religiously can get you started on the road to credit recovery. Gas cards or store credit cards are also fairly easy to get even after a bankruptcy, and their limits are usually low enough to keep you from getting into credit trouble, as long as you don’t have too many of them. One or two cards of this type should be enough to help you to rebuild credit. As with secured cards, it is vitally important that every payment arrives on time. Paying on time will help rebuild credit slowly, but failing to pay on time can drop your rating quickly.

Contact A Credit Repair Company

The really good news is that the bankruptcy itself will drop off your credit rating in time. That time will be eight to ten years, depending on what type of bankruptcy you filed. It’s important during that time to regularly monitor your credit report and keep it free from errors, and then make sure the bankruptcy really disappears when you reach the ten year mark. Of course dealing with three credit bureaus and getting incorrect information removed can be challenging and time consuming, so it is often advisable to enlist the aid of Build My Scores to help.