Posted on Friday, May 2nd, 2014 at 2:24 pm
Declaring bankruptcy is a decision that affects not only your finances but also may affect your credit score. In fact, one of the biggest concerns that people have when considering bankruptcy is how it will affect their credit score. While filing bankruptcy may decrease your credit score short term, it may not affect your credit score as much as you may believe. If you are considering filing for bankruptcy, it is likely that your credit is already low because of maxed out credit cards, late payments and mounting debt.
Credit Scores and Bankruptcy
Your credit score may also be affected by multiple factors including your payment history, outstanding debts, how long you have been using credit and by the types of credit that you use. It is important that you understand what happens when you file a bankruptcy. A bankruptcy can remain on your credit report for up to 10 years, and there is a good chance your FICO score will be low until you have started rebuilding your credit.
Ways to Improve Your Credit Score After Financial Hardship…
- Review your credit report – The first thing you should do is obtain a copy of your credit reports and make sure there are no errors or inconsistencies.
- Pay bills on time – Your payment history makes up 35% of your credit score. One of the easiest ways to improve your score is to make sure you pay bills on time.
- Apply for credit, but make sure you pay the bill off in full each month – You don’t have to carry balances on your credit cards in order to build good credit.
- Beware of credit repair services – You may receive offers from credit repair services promising to help repair your credit. Beware that the fees are high and it’s best to rebuild your credit on your own at no cost.
- Know your limits on your credit cards – Once you begin re-establishing credit, it is crucial to know the limits on your credit cards and to keep your balances well below them. Use your cards sparingly and continue paying the bill on time.
- Do not close accounts – It’s best to keep the credit lines open, however, if you’re tempted to spend over the credit limit, cut up the cards.
The most important lesson to learn is to be patient. The road to bankruptcy did not happen overnight and neither will the road to improving your credit. By following the guidelines above, you can move toward a better financial future and improved credit score.
If you are a Kentucky resident that is interested in filing bankruptcy, call Lawrence & Associates today. We can help!
Contact Us (859.371.5997) for a Free Consultation