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Most people don’t pay much attention to their credit score, which is easy to do when you’ve always been able to pay your bills on time and not get into debt. But even the most responsible consumers can be hit by unforeseen circumstances like job loss or medical bills. Credit cards may be able to float the expenses for a while, but eventually the debt can build up to the point where the payments are no longer manageable. Missed or late payments can lower your credit score, but you can avoid bankruptcy in hopes of preventing any further damage. However, sometimes bankruptcy is the right choice, and there are things you can do to rebuild your credit score after you file.
your credit report
If you have a pattern of late payments, filing bankruptcy can discharge many of your unsecured debts and eliminate those late payments. A bankruptcy will lower your credit score, but after you file, you will be given a “discharge of debtor” document indicating that your debt has been forgiven. At this point, the negative credit events stop and you can begin to establish a positive credit history. First, you’ll need to request a credit report from the three credit reporting agencies: Equifax, Experian, and TransUnion. Review all of the information listed on your report to ensure accuracy, especially that any debts included in your bankruptcy show a zero balance. You can correct any errors by contacting the credit agency.
reconstruction
After you are sure that you have a clean credit report, you can start adding positive elements. You will most likely receive a credit card offer as soon as your case is resolved, but make sure you review the terms carefully before accepting. You may need to start with a secured credit card with higher interest rates and hefty fees. While it’s not ideal, it’s a place to start, and you can avoid paying any interest by making only small purchases and paying in full on time each month. You may want to use a credit card even for a small monthly bill and set up an automatic payment, essentially ignoring the fact that you have access to credit to avoid the temptation to overspend. Is. As time goes by, you may get better offers for a new credit card or you may be able to renegotiate the terms of your current card. Soon, your credit score will improve and you will be eligible for better and better options.
Going forward
Like most negative events in life, ignoring your credit won’t improve circumstances. It’s best to be fully informed about your financial situation and take direct action to make changes. If you’re in debt that you think you’ll never be able to repay, the first step is to determine whether you can modify your budget to get back on track. If that’s not possible, let me help you explore your bankruptcy options. After taking this bold step, opportunities to rebuild your credit will present themselves, and you’ll be back on your feet.
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