Filing for bankruptcy—whether Chapter 7 or Chapter 13—will negatively impact your credit score; there's simply no way around it. However, you don't have to allow bankruptcy to keep your credit (or you) down. Recovering from bankruptcy is certainly doable, but it requires concrete goal-setting, diligence, and adherence to a strict budget and payment schedule. Curious about what you need to do to bounce back after such an impactful life decision? Below, you'll find helpful tips on how to repair your credit score and regain eligibility for future credit considerations.
Assess Your Habits
There's simply no way around it; you'll need to take a detailed look at your spending habits after filing for bankruptcy. You can't change the past, but you can certainly create a new future for yourself. If you filed for bankruptcy due to overwhelming medical expenses, perhaps consider seeking out affordable health insurance. Many plans are income-based, which means you pay only a portion of the premium if you meet income requirements. If, however, you filed for bankruptcy due to irresponsible spending, you'll need to curtail your habit by creating and adhering to a strict budget.
Check Your Credit Report for Accuracy
After filing for either Chapter 7 or Chapter 13 bankruptcy, it's important to monitor your credit report for accuracy. You'll want to make sure your credit report reflects your bankruptcy because it's much better than delinquent accounts. Your report should show a $0 balance for any accounts that have been discharged as a result of your filing. If it's inaccurate, you'll need to contact credit reporting agencies to notify them that they should not continue reporting on discharged accounts. You may need to file a dispute to have any inaccuracies removed from your report.
Acquire New Credit Accounts
You may feel like getting new credit is an impossibility after filing for bankruptcy, but that notion is false. Credit card companies offer numerous options, even for individuals with less-than-perfect credit. Secured cards allow you to submit a deposit, which functions as your line of credit. If you continue to pay off your balances on time and in full every month, you should see your credit score start to climb. Retail credit cards and gas cards typically have more lenient credit qualifications, so these may be suitable options, as well.
Keep Your Balances Low and Pay Accounts on Time
When you acquire new credit cards, make sure you only use them to purchase items you would normally buy throughout the month. Making frivolous purchases is playing a dangerous game—one that may land you back where you started. Use your new cards for necessities like gas, groceries, and your phone bill. When you utilize your cards this way, you can easily keep your balances low. Since credit utilization impacts your score significantly, don't allow your total utilization to exceed 30% of your existing credit across all accounts.
Paying your accounts on time each and every month will also help you raise your credit score, as will paying your balances in full. Missing a single payment can drop your score several points in only a day, so avoid missed or late payments at all costs. If you have trouble remembering to pay your bills, set up auto-pay to avoid making a mistake. Establishing a perfect payment history will help improve your credit, pushing you a few steps closer to re-establishing eligibility for larger credit decisions.
Ron Lunquist is Dedicated to Guiding You Through Bankruptcy
If you feel it's time to file for bankruptcy, Ron Lunquist, Attorney at Law, is here to help guide you through the process. Filing for bankruptcy is an impactful life decision—it can almost feel like starting over from scratch. But with the right guidance and smart financial decisions, you can and will recover. I provide both Chapter 7 and Chapter 13 bankruptcy services, as well as foreclosure and business bankruptcy assistance. To schedule your initial consultation, contact our office at 651-454-0007, or feel free to message us on our contact page.