Many individuals understand they are facing overwhelming debt and continue to avoid bankruptcy because they are concerned about what the process might do to their credit rating. While a bankruptcy can impact your score, you are likely doing more damage to it by missing payments, making late payments and defaulting on loans.
Fortunately, with some effort on your part, the negative impact to your credit score need only be a temporary setback. Here are four things you can do to build a good credit score while working toward a stable financial future:
- Review your credit report: After the bankruptcy is finalized, it is wise to pull a full credit report and thoroughly investigate it. While most issues can be resolved during the bankruptcy process, you can review the credit report to ensure there are no accounts open that should be closed. Many people are shocked to find a department store charge account they opened decades ago is still active.
- Track your credit score: Many credit cards offer this service and it is wise to pay attention. By tracking your actual score month over month, you can start to gain a clear understanding of the actions that can adversely impact your score – as well as the actions that can positively impact it. You could make a graph or track the monthly score on a steno pad with notes about any financial issues you faced during that time.
- Get a secured credit card: On the path to credit recovery, you might not have access to the types of credit cards you had previously. One option is the secured credit card. Essentially, you deposit a sum of money into the account and then use the credit card against that sum. When the deposited money is gone, you cannot use the credit card, protecting you against over-spending.
- Build a strong budget: For many people, the lack of a budget could be a contributing factor to financial trouble in the past. You can overcome this by creating and sticking to a budget immediately after your bankruptcy.
Since every financial situation is different, it is crucial that you work with an experienced bankruptcy attorney who can answer your questions and guide you every step of the way.
