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Bankruptcy and Your Credit
How much will bankruptcy hurt my credit score?
You might think that bankruptcy will ruin your credit score forever, but this is a common bankruptcy myth. While filing for bankruptcy will have a significant impact on your credit score, it won’t it won’t permanently destroy your financial standing. Unlike most negative financial information (which is reflected on your credit report for seven years), bankruptcy will stay on your credit report for ten years.
This might seem like a long time, but you don’t have to wait a decade to start rebuilding your credit; you can take steps toward a better credit score while bankruptcy is still on your financial record. The impact of bankruptcy on your credit is determined by:
- Your current credit score
- What information is on your credit report
In short, you can’t actually know how far your score will fall until you actually file a bankruptcy petition.
Rebuilding Your Credit Score, Starting Now
You can begin rebuilding your credit score today. First, make sure that you understand your financial circumstances. Then, make a point to pay all of your bills on time. This keeps your score from dropping any more than it already has. By staying up-to-date with your financial obligations after bankruptcy, you can begin to reestablish your financial integrity. If you filed for bankruptcy but were not able to discharge all of your debts, these obligations should be your priority.
Tips for Rebuilding Credit After Bankruptcy
- Make a budget and stick with it
- Know where you spend your money
- Always pay your bills on time
- Make outstanding debts your financial priority
Bankruptcy is a chance to start over. You can’t change that past, but you can make sure that your credit reflects the prudent financial decisions you make after bankruptcy. Once you establish a budget that allows you to pay off your bills on time, look into getting a secured credit card. A secured credit card functions much like a debit card in that you pay the bank money before you spend it. However, payments made to a secured credit card should be reported to credit bureaus to help boost your credit score.
Establish a Budget and Stick to It
You can’t rebuild your credit over night, but you can take small steps to gradually build your financial reputation. Combined, these small steps will eventually make a difference in your score. After bankruptcy, it is important to establish a budget. Know where you money goes, and know how much you need to spend on the essentials.
After you create a budget, you can begin saving money to establish a small financial cushion in savings. Savings can be used to avoid going into debt over relatively small financial emergencies. For instance, a sudden car repair might cost several hundred dollars. By saving your money, you can avoid damaging your credit by failing to pay off the bill on time.
Set Financial Goals: Saving for Six Months’ Expenses
Some financial experts recommend having enough money in your savings account to live for six months. This might be unreasonable for your current situation, but it can be a long-term goal to work for in the future. Once you establish some savings, you can begin putting superfluous expenses (like entertainment and gifts) on your credit card.
It usually isn’t wise to put necessary items (like food and other living expenses) on your credit card. Instead, put unnecessary, extra expense on your credit card. As you pay off your card every month, you will begin to rebuild your credit. However, it is imperative that you never spend more than you can pay off at the end of the month.
Port St. Lucie Bankruptcy Lawyer
If you’re facing an overwhelming amount of debt, the bankruptcy attorneys at Crary Buchanan can help you understand your legal circumstances and rights. We have served clients along the treasure coast since 1927. Contact us today to see what more than 85 years of legal experience can do for your case.