The bad news is: there’s no getting around the heavy hit your credit score will take from filing bankruptcy. The good news is that over time, you can take steps to overcome bankruptcy and discipline your spending to get back on track financially.
Your credit score is calculated by five primary factors (and several secondary factors), which reflect your credit management habits. In a certain sense your credit score then represents your overall financial standing. Here are a few tips to nurse your credit back to health:
Where Have You Been?
Be honest with yourself about the events leading up to bankruptcy, if not you run the risk of repeating your mistakes down the road. Were you irresponsible with your bill payments? Did you frequently overspend? Did you have large balances on numerous credit cards? These habits can be a slippery slope to significant debt. Once you realize which habits may have landed you in trouble, you can work to avoid these habits and overcome your bankruptcy.
Where Are You Going?
Get a copy of your credit report and score to survey how the bankruptcy affected your credit. Use this information to determine your unique pain points and find a jumping off point where you can focus your work.
Starting Your Future
Securing a new line of credit and managing the account responsibly is an essential means to add positive history to your credit report. Due to the significant impact filing bankruptcy has on your credit score, your new account most likely will not have the most competitive rates and terms, but if you can bite the bullet in the short-term, eventually your score will improve and you could potentially renegotiate.
Up to ten years, the length of time a bankruptcy can remain on your credit report can seem like a long time. But over time the impact on your credit score decreases, allowing you to overcome the negative effects of filing bankruptcy.