There is no way a person can avoid a credit score reduction when he or she files for bankruptcy. For example, Equifax - one of three major credit reporting agencies - notes that a person with a score between 750-800 should expect a more dramatic decrease than someone who has many negative items previously listed on his or her credit report.
The actual amount a score will drop is out of your hands but how long it stays down is up to you. Remember, there are a lot of factors that make up the credit score and you have the ability to improve many of the factors. As you do, the bankruptcy will mean less and less.
With over a million bankruptcy filings last year, not knowing how to rebuild a credit score has become a very common concern. Luckily, it is possible to rebuild a post-bankruptcy credit score with dedication and patience.
Tips for Repairing a Credit Score After Bankruptcy
Not filing for bankruptcy might cause more problems than living with a lower credit score for years. In fact, the fresh financial start bankruptcy provides is often what people need to get their financial lives back on the right track.
To begin, anyone who has already filed or who is contemplating bankruptcy should be aware of the several ways he or she may start to rebuild a credit score. Equifax lists several tips and methods for how this can be accomplished:
- Avoid the Quick-Fix: Rebuilding a credit score takes time, and quick-fix efforts typically backfire on consumers - be diligent in managing your credit score over time.
- Check Your Credit Report: Each consumer is entitled to a free copy of his or her credit report every year. These reports could contain errors that negatively impact your score. Review your report to ensure accurate reporting.
- Pay on Time: Additional late payments will further reduce your credit score. Developing a history of on-time payments will eventually result in a higher credit score.
- Lower Balances: Avoid using a majority of your available credit. High outstanding balances can have a negative impact on your score.
- Minimize New Accounts: Opening new accounts will result in having multiple credit inquiries appear on your credit report, and will not guarantee raising your score.
- Use your Available Credit Wisely: We all buy groceries and most grocery stores accept credit cards. Get only one credit card and use it for groceries and gas and pay it off each month.
Of course, there are many more things a person can do to responsibly rebuild his or her credit. One of the best things a person can do is set up a monthly payment schedule and abide by it. Additionally, consulting a qualified bankruptcy attorney will not affect your score. Therefore, anyone considering bankruptcy should speak with an experienced lawyer about what to expect and how the benefits of bankruptcy might help his or her situation.
