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Bankruptcy can provide a new lease on life by discharging unsecured debts and making monthly living expenses more affordable. But filing bankruptcy is nothing to enter into lightly or choose without first considering the long-term consequences. For many people, a low credit score is a small price to pay to become debt-free, especially when they are well informed about how to move forward and rebuild their credit after bankruptcy.
Starting from
Most people who file bankruptcy have credit card debt, so the thought of having to put up with credit cards again can be scary. It’s definitely best to live within your means and save up to make purchases to avoid debt. However, your credit score is important, and it will not improve unless you take steps to rebuild your credit. Immediately after you file bankruptcy, your credit report will reflect the bankruptcy itself, as well as any late or missed payments in your past. By paying in full any bills you have on time, this positive history will soon outweigh the negatives. It’s wise to apply for a smaller credit card, even if you have to start with a secured account with a higher interest rate. Make small purchases and pay them off in full each month, and you’ll see your credit score improve. Soon, you’ll be able to negotiate a better interest rate, which could make a difference when you use the credit for larger purchases in the future.
future purchases
If possible, it is best to wait some time after the bankruptcy to finance the car. If that’s not an option, (for example, you lost your car in bankruptcy and you don’t have enough money left over to make the purchase with cash), you may end up paying a higher interest rate after making a larger down payment. Be prepared for The longer you wait to do this using your smaller credit card, the less payments you’ll get. Like taking out any loan, make sure you review your budget closely to ensure that the payments will be easily manageable.
You may be in a position to buy a home within a few years of bankruptcy. The lender will review your credit score and history, as well as your current income and situation, before applying. Most lenders will require a hefty down payment, and you may need to jump through more approval hoops and paperwork than other buyers, but home ownership is definitely an option.
make moves
Every bankruptcy is different, but sometimes filers also have to deal with an eviction or foreclosure as part of their case. Others may choose to move to a more affordable rental to make monthly expenses more manageable or may wish to upgrade after paying off their loan. Whatever the reason for moving, a new rental always includes a credit check. A bankruptcy will not necessarily keep you from renting the house, but it depends on the landlord or rental company. It’s best to let your potential landlord know ahead of time so they will be prepared when your report arrives. Some people also attach a letter explaining their circumstances and proving that they are now able to pay their rent.
no need to delay
Filing bankruptcy can be frustrating, but for many people it is the best possible option. Instead of having a credit report that shows surprise debts and late payments, you can get clean credit post-bankruptcy. If filing is unavoidable, the sooner you file, the sooner you’ll be moving in a positive direction.
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