If you have debts that you are unable to pay, are facing a foreclosure or are being harassed by debt collectors, you might consider declaring bankruptcy. And while bankruptcy can negatively impact your credit, the good news is you can always repair your credit score — and the process is probably easier than you realize.
Depending on the type you are filing for (Chapter 13 or Chapter 7), bankruptcy remains on your credit report for either 7 or 10 years. During this period, bankruptcy’s impact on your credit score will lessen over time. In the meantime, there are a few proactive steps you can take to improve your score. Here are some of them:
1. Routinely monitor your credit
Paying close attention to every detail of your credit is an important part of recovering from bankruptcy. It is important that every entry on your credit report is accurate. Close monitoring of your credit will also help you identify errors and potential signs of identity theft before things can spiral out of control.
2. Adopt healthy credit habits
Adopting and practicing prudent financial habits is crucial if you are looking to rebuild your credit after bankruptcy. These include paying all your debts in time, staying on top of your bills, planning for emergencies, living within your means and, of course, giving it time.
3. Get a co-signer
Looking to buy a new car or appliance? That might call for some form of credit. Unfortunately, your present situation may be a stumbling block. This is where a co-signer comes in. You can consider asking a friend or family member with an impressive credit score to be your co-signer. Taking a credit builder loan that lasts a couple of years can lengthen your credit history and help you rebuild your credit score. However, it is important that you maintain a flawless payment record for the loan.
Bankruptcy laws were created to help individuals who are overwhelmed with debt make a fresh start. Taking deliberate steps to fix the damage caused by bankruptcy on your credit score can help you truly get back on your financial feet again.