The most common deterrent for someone filing bankruptcy is the negative effect it will have on their credit. Many of my clients assume that, since your credit report will list a bankruptcy for ten years, they’ll be unable to obtain any kind of credit at all.
It is true that your bankruptcy will be on your credit for ten years but be rest assured it is not as bad as you think. The older your bankruptcy becomes, especially after the first two (2) years since you have filed bankruptcy, the less important and damaging the bankruptcy will be to potential lenders.
However, you can take active steps to immediately repair your credit. The months and years that follow the filing and discharge of your bankruptcy are very important to re-establishing your credit. You have two options on improving your credit:
(1) Do nothing and hope your credit returns over a 3 to 4 year period; or
(2) Take active steps to improving your credit.
By taking active steps to improve your credit, and by being responsible with any new credit you receive, you will see significant increases in your credit score.
There are two important reasons to rebuild your credit score. First, a bankruptcy hammers your credit score which reduces your chances of availing credit in the future. Hence, unless you bring your credit score up to an acceptable level, the chances of you getting the credit you need to rebuild your life are quite low. Secondly, it is well-known that people with a better credit rating can get a loan at a lower interest rate than those with a bad credit rating. Hence when you improve your credit rating, not only do you become eligible for a loan again, but you can get it at a lower interest rate as well.
The following is a list of recommendations to immediately improve your credit score:
- Find A Credit Union;
- Clean up your credit report as much as possible;
- Establish and Apply for New Credit;
- Become an Authorized User on a Friend’s Credit Card;
- Obtain a Secured Credit Card;
- Get an Installment Loan;
- Get a Store Card; and
- Keep the Accounts Active And PAY ON TIME
In some respects, bankruptcy will affect you for the next ten years. By being financially responsible, though, you can minimize these effects, and get back to a normal life surprisingly quickly.
