Filing for bankruptcy can cause a lot of fears, concerns and uncertainty. One thing you may be afraid about is ruining your credit score. You may hear horror stories about how bankruptcy can completely devastate your credit report.
But is this really true? Here are some important facts to know about bankruptcy and credit to calm your anxieties.
Bankruptcy will not affect your credit forever
It is true that declaring bankruptcy will lower your credit score. Depending on your current credit score, you can expect it to drop between 130 and 200 points. That may sound scary, but it is not a permanent consequence. Your bankruptcy will only remain on your credit report for a maximum of 10 years and you can work on improving your credit much earlier than that.
You can still get credit cards and loans
While you may not be able to obtain cards and loans with the most favorable terms, you can still access credit after bankruptcy. In fact, it is a good idea to expand your credit portfolio responsibly. Secured credit cards, credit-building loans and retail credit cards are fairly easy to obtain even with a less favorable score.
Rebuilding is possible
It is possible to increase your credit score to a good level within just a few years following your bankruptcy. There are plenty of ways to dramatically improve your credit:
- Create a budget and stick to it
- Check your credit score for mistakes
- Become an authorized user on another credit card
With good financial habits, you can even reach a better credit score than before.
Bankruptcy may be the only path to better credit
Chances are that you already have poor credit if you are dealing with overwhelming debt. While declaring bankruptcy may initially cause your score to dip even more, it may be the best strategy for you to get back on your financial feet.