Bankruptcy is a viable option for debt relief, but it does not come without consequences on your credit score. While your credit score will take a hit, sometimes bankruptcy is necessary to get rid of debt and get back on track. Your bankruptcy will show up on your credit report for up to 10 years, but that does not necessarily mean your credit will be in the tank for that long.
You can speed up the credit recovery process after bankruptcy by following some simple steps. Keep reading for some helpful tips to rebuilding a strong credit score.
1. Get new credit cards
After you discharge your debts in bankruptcy, you are still able to obtain new credit. Some creditors will offer you cards with low limits. You may also want to get a secured credit card backed by a deposit. These options can both be useful, but be mindful of fees and high-interest rates.
2. Use credit wisely
Once you get new credit, be smart. Do not spend up to the limit or more than you can afford. You can accomplish this by:
- Creating a budget: Determine what you can afford to pay each month on debts after you cover necessary expenses.
- Borrowing a reasonable amount: Only use your credit cards for things you know you will be able to cover.
- Set up automatic payments: Most credit cards come with the ability to make electronic payments online. This directly deducts funds from your bank account on the due date, so you do not miss any.
You want to prove you can pay your debts as responsibly as possible.
3. Fix errors on your credit report
You can get one free credit report from each reporting bureau every year. Review your reports and resolve any errors. If you notice incorrect balances due or debt that is not yours, you may want to file a dispute with the reporting bureau.
See this Bankrate article for more details on rebuilding your credit.