Your Credit Score After Personal Bankruptcy

Filing for bankruptcy is usually the last step an individual takes when they have exhausted all other options of dealing with an unmanageable amount of debt. Usually, people struggle to keep up with their bills because they may have lost their job or incurred huge medical bills. Many others got caught up in the housing debacle and are stuck with extra-high mortgage payments and a house that is only worth half of what they still owe on that mortgage. Still others are forced to file bankruptcy because they simply abused credit cards and can no longer make even the minimum payments.

Before one gets to the point of filing for bankruptcy, their credit score has usually been seriously degraded. Failing to pay bills on time, or not paying them at all, will definitely cause one’s credit score to drop. Filing for bankruptcy is actually a chance to wipe the slate clean and start to practice smarter financial habits that will help you rebuild credit.

Some people might just be so happy to be rid of the stressful burden of massive debt that they will make themselves a promise to never borrow money again. Well, that sounds good, but for most people living in the real world, it is not very practical. While one can usually get by without credit cards and rely on a debit card, having good credit touches so many other areas of life.

If you ever want to buy a home and qualify for a mortgage, having a good credit score will determine whether or not you are approved and the rate of interest you will be given. The same applies to other types of loans such as to purchase an automobile or finance some major appliances or furniture. Your credit score can be a factor in numerous activities most of us take for granted. You may not get a job because of a bad credit score. Your insurance rates could go up. If you want to rent a car or reserve a hotel room, it is very helpful to have a credit card.

One of the requirements of getting your debts discharged in a bankruptcy proceeding is that you take an educational class that teaches you how to deal with money and debt. If you pay attention, you will learn how to properly use and manage debt. Rebuilding credit will also be discussed.

The first step toward rebuilding credit after bankruptcy is to become responsible. You must pay all of your bills and all of your creditors on time, every month. By establishing a long record of regular payments, you will begin to rebuild credit. Some of the bills that you might concentrate on paying without fail include your rent or mortgage, utility bills and any installment payments you may have.

Setting up a checking account and possibly a savings account will show that you are taking steps to improve your financial standing. After a while, you might apply for a small personal loan from your bank and repay it in a matter of months. This will be a positive mark on your credit report. You can obtain your gov free credit report from to perform this check.

Applying for a secured credit card is another way to restore your credit. It works by putting a sum of money in a savings account. That money becomes your credit limit. The money remains in your account as you use your secured card. As long as you follow the terms of the credit agreement and pay your credit card bills as they come due, your deposit is never touched. However, if you are late or default, the bank or credit card company can get back the money you borrowed from the amount you have on deposit.

Finally, time is your ally when trying to rebuild your credit and credit score. Just as it probably took years to destroy your credit, it can take years to restore your good standing. By paying your creditors on time and being financially responsible, you will positively impact your credit score.