Every year, close to 1.5 million US citizens file bankruptcy. When debts get out of hand, bankruptcy allows one to get a fresh start. On the downside, however, it tarnishes the appellants’ credit score. Most bankruptcies remain on the appellants’ credit reports for 7-10 years, which makes it difficult for them to qualify for a loan, and even if they do, they are asked higher-than-usual interest rates. Needless to elaborate, similar is the scenario when it comes to insurance premiums.
Essential Steps to Take Post Bankruptcy
If you are in a similar situation, it is important to fix your credit score before it too late for damage control. To help, here are the steps to take after you file for bankruptcy.
Monitor Your Credit
The first and foremost step to take after filing for bankruptcy is to start monitoring your credit score. All three major credit bureaus – Equifax, Transunion and Experian – provide US citizens a free copy of their credit reports, once a year, which consist of all records of their financial dealings. You can get a copy of the reports and examine them for any kind of errors, missing or inaccurate information related to your address, personal information or employment, which may lower your credit score.
The most notable difference in your credit report after bankruptcy will be the debt-to-income ratio. The first and most obvious step to undertake in such a situation is prepare a budget and to stick to it until your credit score improves. Though the period of recovery may seem like an eternity, remember that it probably took years of bad financial planning or some grave miscalculations to arrive at bankruptcy, and therefore, it would take at least a few months to backtrack. Avoid overspending, ensure that you pay your bills on time and try to make more than the “minimum” payments.
Save, Save, Save
The next most important step is to start saving. It is advisable to make efforts to save at least 10% of your income or any amount that is possible within your budget. The money you save may ultimately help you pay off your debts, start a fresh bank account, and make asset-based investments – all of which are sure to help resurrect your creditworthiness. Once you have a healthy saving, you can also use it to manage debts, financial accounts and payments, as and when required.
Improve Credit Scores After Bankruptcy
Bankruptcy, though a respite for those who do not have any resources to meet their financial liabilities, always has a grave impact on their credit score. On a positive side, however, it also provides them with a clean state to start afresh, and by extent, an easy opportunity to fix credit scores. To learn more about how to improve your credit score after filing for bankruptcy, please feel free to speak with one of our credit repair consultants.