One of the reasons people delay filing for bankruptcy is the impact it has on credit. People generally lose their revolving lines of credit and see their credit scores drop by three points when they initially file. However, those drastic consequences are only temporary.
A filer can begin rebuilding their credit shortly after their discharge. Those hoping to pursue a brighter future after filing for personal bankruptcy need to have a plan for rebuilding their credit. The three tips below can help people achieve that goal even before a bankruptcy finally comes off of their credit report.
Obtain new credit as soon as possible
Those who have struggled with debt may be averse to establishing new lines of credit initially. However, the only way to rebuild credit is to use it appropriately. The credit bureaus look at numerous factors when evaluating credit scores. Older lines of credit have a strong positive impact on people’s credit reports. Therefore, opening a secured credit card when offers first start arriving after discharge is often a smart move. People can use their credit cards for limited regular purchases and avoid carrying a balance. Their regular history of payment in full may help them access better credit options within a few years of their discharge.
Enroll in credit monitoring
There are a variety of ways for people to track their credit. There are several apps that provide regular updates and insights into individual credit scores. Each of the credit bureaus may also allow people to request a copy of their credit report occasionally for free. Regularly checking credit scores and the information reported by the credit bureaus can help people quickly identify inaccurate information and have those blemishes removed. Proactively monitoring credit can also help people see the impact of their financial decisions.
Rework one’s household budget
The discharge granted at the end of bankruptcy eliminates numerous financial responsibilities. People may have hundreds of dollars in income at their disposal that they previously had to commit toward minimum monthly payments on medical debts and credit card balances. Reworking a household budget as soon as possible can allow people to start saving and to stay on top of their financial obligations. Those who prioritize living within their means and responsibly using credit regularly may see their credit scores increase to where they were before bankruptcy within a few years of their discharge.
Prioritizing financial recovery can help people enjoy the best possible life after bankruptcy. Those who use credit responsibly, monitor their credit reports and control their spending can move on from bankruptcy more quickly and may enjoy improved long-term financial circumstances.
