Declaring Chapter 7 bankruptcy can be the appropriate solution when facing overwhelming debt. Unfortunately, taking this path has a way of dealing a blow to your credit score.
While facing this problem head-on might seem daunting, clambering back up the credit score ladder remains possible. A few insights could be helpful in your quest to make that happen.
Tip 1. Review your current score
Begin by finding out where your credit score stands; that way, you will know whether your efforts are working. Expect the bankruptcy to stay on your credit report for up to 10 years; on a positive note, its impact lessens over time, which should benefit your ranking.
Tip 2. Build a budget
Creating and sticking to a budget is paramount, as having one will help you manage finances, live within your means and avoid falling once more into debt. If you find something incorrect, report it immediately, for the simple fact that doing so can help improve your score.
Tip 3. Open a secured credit card
A secured credit card is a fantastic, simple-to-understand tool for rebuilding credit. Unlike regular credit cards, secured cards require a deposit that determines your credit limit. Use one for small purchases and pay the balance in full each month, as it shows lenders that you can manage credit responsibly.
Tip 4. Consider a credit-builder loan
A credit-builder loan is another method of beefing up your credit score. The lender holds the money you owe in a bank account while you make payments in the form of regular installments. Credit bureaus will then receive information on your payment history, which will shine a positive light on how the individuals in charge of assessing consumers view you.
Tip 5. Pay all outstanding bills
Squaring away bills on time is one of the most important habits to develop when rebuilding credit. While late payments are bound to lower your credit score, never missing a deadline should have the opposite effect. A savvy move is to set up automatic payments or digital reminders.
Tip 6. Stay patient
The chances are high it will be a while before you return to a good credit rating. Consciously keep reminding yourself that progress is gradual. Remember, bankruptcy is not an end but a chance to begin fresh and build toward a stronger, more promising future.
Although achieving a desirable credit score after Chapter 7 bankruptcy may be challenging, it is still doable. Those who reach this goal will have a sense of pride that allows them to pursue their wildest dreams and ambitions, such as starting a business, buying a home or traveling the world.