Many people avoid filing bankruptcy because they are worried about its negative impact on their future. Fortunately for those struggling with overwhelming debt, the Bankruptcy Code exists to help build a stable financial future. After filing, though, many people might struggle to build a strong credit score and financial security.
There will likely be some bumps along the way, but there are numerous tactics an individual can follow to begin rebuilding their credit after a bankruptcy. For example:
- Check your credit report numerous times: While the bankruptcy will likely eliminate numerous lines of unsecured debt, you should actively look to cancel these accounts. From credit cards to a department store charge account, you might have several accounts open that should have been closed years ago. Check and recheck your credit report to catch these accounts.
- Apply for a secured credit card: A secured credit card is like a bank account. You deposit a certain amount of money to the account and then use only that balance against the charge card. This is a great way to get back on your feet and start building your credit score.
- Manage your credit score: It is wise to learn how various things impact your credit score. One tip is to pay more than a minimum credit card payment, but less than the full amount leaving a few dollars on the credit card for the next month. This can put you in good standing with the credit card company yet still give you complete control over your finances.
- Create a budget and stick to it: This is the key element of controlling your finances. By truly understanding your debt-to-income ratio, you can build a budget that allows you to pay debt while having money to start a savings account.
- Build a savings account for financial emergencies: Most financial emergencies range in the thousands of dollars, but having even a few hundred dollars put away to account for minor emergencies allows you to handle issues in cash rather than relying on credit cards every time something comes up.
These tips are all geared toward one result – to help people avoid the same mistakes that led to overwhelming debt the last time. While it is nearly impossible to account for job loss, divorce or a medical emergency, you can have protections in place to help soften the blow of unexpected difficulties. With a few strong credit cards and a solid savings account in place, you have a better chance at surviving potential financial hardships while building a strong credit score after bankruptcy.