When you think of bankruptcy, you likely think negative thoughts like financial irresponsibility, loss of property, and financial distress. However, the people who have experienced bankruptcy firsthand might tell you a different story. They may associate bankruptcy with financial security, relief, and a new beginning. While bankruptcy is not something to take lightly, it can provide relief from debt that is too much to handle.
If you have been struggling with overwhelming debt, you may have heard a lot of myths about bankruptcy. These myths are often used by creditors to scare you. While bankruptcy can have a big impact on your credit score, it can also be the one thing that puts you back on the path to financial security.
The Truth About Your Credit Score After Bankruptcy
If you file bankruptcy, it will impact your credit score. However, it will not change it for the rest of your life. Bankruptcy is not a punishment and was never designed that way. It was created to be a second chance for the working person who came across a hardship on the road of life. Most people who file for bankruptcy have not maxed out their credit cards buying extravagant things. Instead, it was more likely a medical emergency, loss of job, or other unexpected expense that caused a bump in the road. Bankruptcy offers a second chance that involves hard work and short-term sacrifices.
Filing bankruptcy will lower your credit in the short term. It can lower it as much as 200 points even. However, it is impossible to calculate how much it will impact your score. Bankruptcy will stay on your credit report for up to 10 years, but your credit score will not be a mess the entire time. There are things you can do to start rebuilding your credit right after your bankruptcy is final.
Rebuilding Your Credit After Bankruptcy
Part of the bankruptcy process is rebuilding your credit. Bankruptcy is not just to discharge debt, it is a way to achieve financial security. Here are a few ways you can help rebuild your credit after bankruptcy:
- Pay off your existing debt – If your bankruptcy did not eliminate all your debt, now is the time to pay them off starting with the debt with the highest interest rate. Curb spending and consider getting a second job to earn extra income to pay on these debts.
- Work at building your credit score – Consider a small installment loan or secured credit card and keep credit balances low and show responsible payment habits to rebuild a positive credit.
- Avoid new, unnecessary debts – Create a budget and put money in a savings account so you are prepared for unexpected expenses. Save for large purchases and limit credit card use.
- Increase your income – Try to get a raise at your current job or consider higher education to advance your workplace value.
Contact an Experienced Bankruptcy Attorney Today
The attorneys at Tyler Moore Law can advise you if bankruptcy is right for you and give you insight as to what kind of impact bankruptcy may have on your credit score. Contact us today to schedule a consultation.