Many people believe that
bankruptcy permanently destroys your credit, but this couldn’t be further from
the truth. In fact, bankruptcy may even save your credit in cases where
an old debt kept your score down. Now that you have gotten a fresh financial
start, there are a number of steps you can take to begin rebuilding your credit.
How Does Bankruptcy Affect my Credit Score?
The purpose of your credit score is to show lenders how much risk they
would undertake if they were to loan you money. High credit scores indicate
that your debts are paid regularly and on time. Lower scores are a sign
that debts are not paid on a regular basis. Naturally, then, it makes
sense that bankruptcy would cause your credit score to drop, but this
is only temporary. Consider the following tips to begin rebuilding your score.
What Can I Do to Rebuild My Credit Score?
The first thing you should do is obtain a copy of your credit score from
one of the three major credit reporting agencies: Experian, Equifax, or
TransUnion. Review it carefully and check for any errors. If there are
errors, such as a debt that should have been discharged by your bankruptcy,
contact the credit agency and work to resolve them.
The rest relies on getting back to basics. Do not be tempted to spend more
than you are able to afford. Pay your bills on time and in full, including
debts that were not discharged by bankruptcy (like student loan payments,
One of the biggest mistakes that people can make after bankruptcy, although
understandable, is to avoid credit altogether. While it may seem like
the better idea to steer clear of any new debts, this will not help you
rebuild your credit. Rather than avoiding it, find ways to use credit
responsibly and in small measure. One way you can do this is to take advantage
of a secured credit card that reports to one of the three credit agencies
and make regular, on time payments. Pay off the entire balance each month
to avoid having to pay interest and to show lenders that you are not a
risk. After a couple of years, this alone could result in a dramatic improvement
to your credit score.
Other methods for improving your credit score include opening up a new
bank account or applying for a gas card. If you drive a car, gas is a
necessity, so it pays to rebuild your credit through this kind of regular
purchase. Signing up for automatic bill pay is another great way to rebuild
credit because it will ensure that your bills are always paid on time.
It is important to stay patient during this process and to keep up with
good financial habits. Make it a point to stay on top of your credit score,
checking it as often as once a month. With all of your efforts, you should
start seeing that number increase little by little.
Bankruptcy is not a financial death sentence. Rather, it is an effective
way for over one million Americans annually to reboot their financial
health. When you take the appropriate steps to fix your credit, you can
enjoy financial freedom once again.
Are you considering filing for bankruptcy in the Dallas / Fort Worth area?
The bankruptcy lawyers at Allmand Law Firm, PLLC are available to answer
your questions and inform you of your options.
Sign up today for a FREE financial empowerment session by calling us at