When you file for bankruptcy, it is essentially a declaration that you cannot pay back the debts that you owe. This has a significant impact on your creditworthiness and credit score.
Fortunately, the situation is not permanent. While the fact that you filed for bankruptcy will stay on your credit report for several years, there are steps you can take to rebuild your credit score over time. Below are some of the ways you can go about it.
Check your credit report
It helps to understand your current credit score so you can know where things stand. You may also identify inaccuracies or errors that negatively impact your score, such as incorrect information or fraudulent loans taken in your name.
Stay current on pending bills
It will help your credit score if you keep up with pending bills. Make consistent and on-time payments for debts undischarged by the bankruptcy process and your utility bills.
Watch your spending habits
Do not waste money on frivolous expenses, or you may find yourself in similar financial straits that led to bankruptcy. Plan a budget and stick to it. If possible, adopt a frugal lifestyle and only spend money on necessities. Proper financial management skills can help you avoid spending above your means or taking unnecessary loans to meet your daily expenses.
Borrow strategically
You can also rebuild your credit score by borrowing strategically. The key is to borrow only what you can afford to repay and make timely payments. You can do this by using a secured credit card that requires a deposit which becomes your credit limit, or by taking out a small personal loan and making timely payments. It can help establish a positive payment history and improve your credit score.
Rebuilding your credit score is a gradual process
It takes consistency, determination and accountability to rebuild your credit score. Therefore, you should not expect overnight results, although you should see some improvements in about a year or so if you remain on track.
Learning more about what else you can do and seeking guidance before making crucial financial decisions can make a huge difference in your bid to reclaim your financial health.