Filing for bankruptcy will have a negative effect on your credit score, but it also provides a clean financial slate upon which you can rebuild your finances. The damage it causes is temporary, and you can take steps to repair your credit score immediately after you complete your filing.
A good credit score is integral to achieving many goals in life, from buying a home to securing the job of your dreams. Here are a few steps to take to ensure your score bounces back after bankruptcy.
Automate recurring bills
Paying bills on time has a big positive impact on your credit score. If you have difficulty remembering each month, automate bills to ensure they get paid on time. You can automate through many utility providers, such as cable, gas, and electricity. Many banks can also make automated payments on your behalf by withdrawing funds from your account and dispersing them to the appropriate parties.
Acquire a secured credit card
Responsible use of a credit card is another great way to build up your credit history. Secured cards require some type of down payment, which acts as collateral in the event the cardholder fails to make payments. When using secured cards, only make purchases that you know you can afford. When it comes to the monthly payment, pay the total bill in full as opposed to the minimum payment. When you pay in full, you avoid the interest expenses and save money on the purchase.
Establish a savings fund
While responsible use of a secured credit card must factor into your financial strategy, you should avoid making significant purchases using cards or loans. That’s where a robust emergency savings account comes in. In the event of an unexpected expense, such as car repairs, your emergency savings will spare you from relying on credit too heavily. Just make sure you have a separate savings account for financial goals, such as making a down payment on a home.
In most cases, bankruptcies remain on a person’s credit history for up to ten years. Use that time to make good decisions, develop responsible spending habits, and re-build your finances for a bright future.