Personal bankruptcy can be a difficult but necessary decision after a job loss or severe illness. People sometimes have so much debt that they have no feasible way of regaining financial control unless they restructure and/or eliminate some of that debt.
Personal bankruptcy, when successful, can discharge quite a bit of someone’s unsecured debt. Unfortunately, filing for bankruptcy will drag someone’s credit score down, often by 200 points or more. The credit bureaus will continue reporting the discharge of someone’s that’s for seven or 10 years after their discharge, depending on the type of bankruptcy they filed, although the impact that a filing has will lessen over time, even as it remains on someone’s record.
In many cases, people will have rebuilt their credit or even raised their score beyond what it was previously even before the bankruptcy comes off of their credit report. How do people go about increasing their credit score and improving their creditworthiness when there is still a bankruptcy on their recent record?
Primarily through consistent, on-time payments
The single best means of rebuilding one’s credit after bankruptcy is through using credit in small amounts responsibly. Avoiding month-to-month balances and instead paying the full amount due each with statement is typically the best approach to help someone avoid getting to a point where they cannot manage their obligations again. Each payment will also slowly build a history of financial responsibility.
The sooner someone obtains new lines of credit and begins making regular payments, the more of a history they will have when the credit bureaus cease reporting their discharge. In the first year or two after bankruptcy, people may only qualify for mediocre, secured lines of credit. However, using such lines and paying them off consistently will pave the way for better options in the near future.
Starting early, paying consistently and opening a variety of different accounts are all ways to slowly but steadily boost one’s credit score after successfully discharging debts via personal bankruptcy.