While bankruptcy will negatively impact your credit score, it can also be a way to take control of your finances when your level of debt becomes unmanageable. Making smart decisions after bankruptcy is integral to rebuilding your credit once again, and you can begin the process immediately after filing.
Bankruptcy generally stays on your credit score for a period of ten years, but you can begin reducing its effect on your credit as soon as possible. Here are a few effective strategies to try.
Make sure you pay bills on time
A person’s payment history makes up a significant portion of their credit score. As a result, on-time bill pay can have a major impact on your credit post-bankruptcy. Setting up automatic payments to come out of your bank account is a good strategy for paying bills on time each month.
Establish an emergency savings fund
Many people get into financial trouble due to unexpected expenses. An emergency savings fund helps you cover things like medical bills and car repairs without the use of credit, which can add up over time when it comes to interest payments. To build a fund, take as much as you comfortably can from each paycheck.
Get a secured credit card
While it is important to use credit cards responsibly after bankruptcy, they are also an essential component of establishing good credit once again. A secured credit card is ideal in this case, as it requires a cash deposit, which then becomes your line of credit. If you continue to make payments on time and use the card responsibly, you can eventually level up to an unsecured credit card.
You should also check your credit score frequently after bankruptcy. Doing so allows you to track your progress while also catching any erroneous entries that may negatively impact your score.