Reporting bankruptcy can feel like the end of the world. It can affect any financial decisions you make in the future and isn’t something to be taken lightly.
However, bankruptcy isn’t all that uncommon. You’re not alone – over 500,000 Americans and 140,000 Canadians filed for bankruptcy in 2019, and the number is expected to rise in 2020.
The rules of bankruptcy can vary from state to state, but the general definition is a legal proceeding that’s carried out to allow either individuals or businesses freedom from their debts, while providing the creditors a chance of repayment.
How Does Bankruptcy Affect My Credit Score?
Depending on which chapter you file for, the bankruptcy will automatically be removed from your credit score in either 7 or 10 years – but for many people, this is far too long.
A chapter 13 bankruptcy will be deleted after 7 years, but a chapter 7 won’t be removed for 10 years, as none of the debt is repaid.
A bankruptcy hanging over your credit rating can be debilitating- which is understandable considering it can take off hundreds of points from your score depending on how high your score is. If you have a higher score, it will drop by more points than if your score is lower.
A decade is a very long time, but it’s not the end of the world. It is possible to get credit before the 7 or 10 years is up.
Many people try to apply for loans and credit cards so they can pay them back and rebuild their credit score – but unfortunately, it’s not that easy. Any loans or credit cards you apply for may be rejected – and if they are accepted, you’ll be offered an inflated interest rate. There’ll be limits on how much you borrow too, which can put anybody in a sticky situation.
It can feel like a losing battle when you’ve got a bankruptcy hanging over you – but it’s not the end of the world. There are things you can do. Keep reading for some tips on how you can rebuild your credit score.
How Do I Rebuild My Credit Score?
First of all, you may want to check for inaccuracies in the information in your credit report. If there are any inaccuracies, you can dispute the bankruptcy.
You can also ask the credit bureau how they verified your bankruptcy. With any of these disputes, you may have to wait up to 30 days to get their response.
You may want to consider a credit repair company to help get your credit report back on track. Although it is possible to repair your credit score yourself, it’s always useful to have a bit of extra help.
Credit repair companies are great at disputing any negative items on your credit report – and it saves you the hassle of going back and forth with various companies, the courts, and the credit bureau. However, you must be wary – the Credit Bureau can’t always be trusted. The way they word things can be misleading and to be frank, daunting.
Be sure to focus on the facts, and not get over emotional about the situation. Start by considering how you got into this situation. Managing your finances has to become a regular occurrence to prevent this from happening again.
Review your income and your expenses and try to arrange for your direct debits to be taken on dates where you’ll have the funds.
If possible, set up an emergency account to prevent further financial difficulty. It’s always good to have that backup for when you have a bill due and a low balance in your current account.
To rebuild your credit score, you need to ensure that all bills and direct debits are paid on time. Your payment history accounts for a large percentage of your credit score, so missing payments will have points on your credit score dropping like flies.
All of this is important if you want to avoid accruing new debt. After filing for bankruptcy, all or most of your debt will have been discharged – so it’s easier to avoid accruing new debt.
Consider it a blank slate – but any further debt could be detrimental to your credit score. To learn more on how to remove bankruptcy from your credit report, then head on over to read this post from Crediful.