Bankruptcy is often viewed negatively, but there are many positives. Despite common misconceptions, bankruptcy does not mean your credit score is ruined forever.
While there may be some initial impact on your credit score, post-bankruptcy, you can quickly start to rebuild your credit by following some of these steps.
Start as you mean to go on
While you were in debt, maintaining good financial habits was probably near impossible. Most of your funds were probably going into paying off debts. Post-bankruptcy, you have an opportunity to develop good financial habits. Key factors to consider include:
- Paying on time: Being late on a payment may not seem like much, but it is. Paying on time, every time, is also significant. Your credit score will soon improve by simply doing this with your utility bills.
- Low debt-to-income ratio: While you may still be entitled to some credit cards and loans post-bankruptcy, it’s best to keep this to a minimum if possible. To improve your credit rating, you’ll need to show a low debt-to-income ratio.
- A strong financial foundation: Post-bankruptcy, having a strong financial foundation is crucial. Do you have an emergency fund in place? Even a little can go a long way. Have you created a post-bankruptcy budget that prevents overspending?
Another factor that is often neglected is whether or not you are receiving an income that reflects your worth. Have you been with the same company for a long time? Maybe you are entitled to a raise. Do you have any unique skills that would allow you to engage in a side project for a higher income?
Consistent monitoring
It is relatively easy to monitor your credit score and your progress. Using services such as Experian can show what you are doing right and whether there are areas of improvement.
You don’t have to face debt or bankruptcy on your own. Seeking legal guidance can help alleviate a lot of pressure.