Though bankruptcy is often one of the best ways to get out of debt, it can damage your credit score after filing. However, despite what many believe, this is not a permanent situation, and you can regain good standing with your credit. There are tricks to know though when trying to improve your credit score.
There is life after bankruptcy, and you can open new lines of credit and take out loans again after you get back on your feet. By working with an experienced bankruptcy attorney, you can receive the guidance you need to successfully file and restore your credit after your bankruptcy has ended.
For more information about how the bankruptcy attorneys at Sawin & Shea can help, check out our list of bankruptcy resources. We are dedicated to helping our clients regain control of their finances and can offer you help and guidance even after your bankruptcy has ended.
Despite the hit your credit might take after filing, it is possible to rebuild your credit with some dedication and responsible spending practices. Below are some of the top tricks and tips for regaining a good credit score after bankruptcy.
Bankruptcy will not necessarily cancel all of your debt, so any accounts that are not discharged will still need your attention. During and after your bankruptcy, it is essential that you continue to make all of your payments on time to avoid further damaging your credit. The more you continue to make payments on time, the faster your credit will improve. Furthermore, if you can put even more money towards paying down your debts that are not canceled with bankruptcy, it will significantly improve your debt-to-income ratio, further boosting your credit.
It is not uncommon for mistakes to be made with credit reporting. If you file for bankruptcy and you feel that something isn’t right, make sure that all of your accounts are being correctly reported. For example, any accounts included in your bankruptcy should be reported as having a $0 balance, discharged in bankruptcy. If they still show that they are delinquent, this is an error that you should have fixed because it can negatively affect your score.
Moving from one job to the next can indirectly affect your credit score. While your score will not drop simply from switching careers or employers, lenders will look at this when determining if you are eligible for opening a new line of credit—and new lines of credit will help you rebuild your score. So, it’s important to maintain a stable career and income if possible. The more reliable you are, the more likely you will get approved for new credit.
Though it can be a challenge to open new credit cards or take out new loans after a bankruptcy, it is not impossible, and this is essential to rebuilding your credit. Paying off and closing many accounts looks bad for your credit because it shows that you are not responsible or reliable enough to keep those lines of credit open and keep up with on-time payments.
So it’s actually beneficial to open lines of credit once other accounts have closed to prove to lenders that you are capable of responsibly borrowing money and paying it off on time. A positive history of credit accounts with on-time payments is the best thing for boosting your credit score.
Try applying for a secured credit card or a credit builder loan, as they are much easier to obtain when your credit is affected by bankruptcy. A secured credit card, for example, will require a cash deposit upfront as a show of your creditworthiness, and as long as you keep up with payments, you should be able to use this to rebuild your score. Not all secured cards report to credit reporting agencies, so make sure that the one you pick does.
You can also focus on taking out small loans that you know for a fact that you can easily pay back. Even if the loans or credit cards you open don’t have high limits or high amounts, simply having some new open accounts and making on-time payments will boost your score by rebuilding your positive credit history.
For accounts that stayed open throughout your bankruptcy, try asking for a credit line increase, even if you don’t need it. Having a higher credit limit with a low balance is another way to boost your credit score. This is another reason why it can be helpful to open new credit cards or take out new loans even if you don’t necessarily want or need them right away. Just use them to make small purchases you know you can easily pay back.
This can help you build your credit back up so that when you do need to take out a larger loan for something important or do need a large credit line increase in the future, you will have a positive credit history and good credit standing to back you up.
For more information about bankruptcy and credit scores, get in touch with the attorneys at Sawin & Shea today. We believe in providing compassionate and understanding representation to those struggling with debt. Our experienced attorneys can help walk you through the bankruptcy process every step of the way. We can even offer guidance after your bankruptcy case has ended to help you rebuild your credit.
Contact us at 317-759-1483 or send us an email for a free consultation today!