Bankruptcy is a tough legal process with long-term consequences for your credit. The good news is that no matter how bad your credit becomes, it won’t last forever.
Bankruptcy remains on your credit report for seven years or longer, and it may have you wondering, “can bankruptcy save my credit?” Proactive efforts can help you begin boosting your credit right immediately. After bankruptcy, your credit might suffer a significant setback, with a bad mark on your credit record that can last years. However, with hard effort and sensible spending, you may rebuild your credit.
Develop good credit habits
The key to rebuilding excellent credit after a bankruptcy is to practise strong financial practises. Keep these concepts in mind to help your credit recover from any setbacks: pay any debts on time, limit your credit card usage, and keep your credit balances low. Reducing your reliance on credit cards will help you recover your credit after you’ve filed for bankruptcy. Secured credit cards, on the other hand, can help you start to rebuild your creditworthiness in the eyes of lenders. A secured credit card needs a refundable security deposit, which is subsequently used to borrow against. While these cards have high interest rates, if they report to all three credit agencies, they’re a good way to demonstrate responsible credit conduct until you’re better suited for a standard card with better terms.
Keep an eye on your credit
Keeping track of your credit information is an important component of getting back on your feet after a bankruptcy. After you’ve filed, you’ll want to keep a watch on your credit to make sure the accounts that have been discharged are reported appropriately. Credit monitoring can also help you identify errors and early indicators of identity theft, such as loan applications made in your name, before they get out of hand.
Allow the credit bureaus to report your payments
Creditors and lenders aren’t required to record your activities to the credit bureaus, so inquire. After bankruptcy, any lender or creditor you use should ideally report to all three so that your good activity is recorded and your credit score is raised.
Maintain a modest level of credit balance
When your credit card balance is low, it suggests you’re utilising a smaller fraction of your total credit limit. A credit usage percentage of less than 30% is recommended by experts. Lenders look for a low credit usage ratio as an indication that you’ll repay what you borrow.