Many people in debt are hesitant to file for bankruptcy, fearing that doing so will ruin their credit. While bankruptcy does hurt your credit temporarily, there are still ways you can recover.

With your debts discharged, you can finally silence creditors for good and start building wealth again with a clean slate. Here’s more on how bankruptcy can impact your credit and ways you can improve it after filing.

How Does Bankruptcy Impact Your Credit?

To build healthy credit, you must have a good payment history. Your credit score begins to suffer when you continuously fall behind on payments. If you still can’t get ahead and decide to file for bankruptcy, your credit takes a more sustained hit, since you state that you will not be making the payments you agreed to.

Bankruptcy impacts everyone’s credit differently. If you already have bad credit when you file for bankruptcy, you might see a more significant impact on your credit score compared to those who file with good credit.

Additionally, the impact on your credit depends on the type of bankruptcy you file. A chapter 7 bankruptcy remains on a credit report for ten years, and a chapter 13 bankruptcy stays on your report for seven—but don’t let that alarm you.

Although your bankruptcy remains on your credit report, you’ll finally be able to stay current on your bills since you’re no longer in debt. Choosing not to file for bankruptcy could actually cause more damage to your credit in the long run.

How to Rebuild Your Credit After Bankruptcy

Although you might be concerned about your credit after filing for bankruptcy, all is not lost. There are several ways you can recover from bankruptcy, including the following:

Keep a Close Eye on Your Credit

To ensure that you’re making progress on rebuilding your credit score, you should check on it periodically. Further, it’s wise to check your credit report to understand the factors determining your overall credit score.

This helps you to be more strategic when improving your credit score by focusing on the things that work and eliminating what doesn’t. Additionally, when you regularly check your credit report, you can easily identify errors that may indicate theft.

Be Prepared for Unexpected Bills & Limit Credit Card Use

If you want to rebuild credit after your bankruptcy, it’s vital that you identify the reasons why you had to file in the first place. There’s a common myth that those who file for bankruptcy are financially irresponsible. However, anyone has the potential to find themselves in a financial crisis.

You might have overdue medical bills from a severe accident, or you lost your job. Whatever the case may be, it’s important to ensure you always have an emergency fund at your disposal to help cover unexpected bills. An emergency fund also prevents you from opening new lines of credit or overusing your current credit card, both of which can negatively affect your score.

Pay Your Bills on Time

As mentioned above, past-due payments are one of the driving factors that make up your credit score. In fact, payment history accounts for 35% of your FICO score. That’s why it’s crucial to make payments on time if you want to see a significant improvement in your overall credit.

Use a Secured Credit Card

Another great way to rebuild your credit after bankruptcy is by acquiring a secured credit card. A secured credit card requires an upfront deposit equal to your credit limit. For example, if you have a credit limit of $1,000, you will make a $1,000 cash deposit to acquire the card. This money reimburses your lender if you fail to make payments.

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