Access to credit is essential for most people who make big purchases, and bankruptcy can throw a wrench into a debtor’s access to credit. To be clear, bankruptcy may be a very wise course of action under the circumstances and its negative impact on credit access may not outweigh its benefits, but it is still important to understand that rebuilding credit health after bankruptcy
Bankruptcy will obviously result in a significant blow to a debtor’s credit score, and this will absolutely impact the debtor’s ability to open lines of credit, obtain credit cards, take out loans, and so on. In many cases, though, a debtor who files for bankruptcy may already have a poor credit score, so the decrease will not necessarily be as dramatic as may be expected.
The process of building back up one’s credit health is a long one, but improvements can be made relatively quickly. Though a bankruptcy filing may remain on a debtor’s credit score for 7 to 10 years, it doesn’t have to take that long before a debtor is able to make significant improvements to his or her credit access.
Aside from clearing discharged debts from one’ credit reports, keeping current on bills and spending wisely, one of the first places a debtor can start is to check into secured credit cards. The idea here isn’t to go wild with credit, but to wisely use it to rebuild one’s credit score. Swearing off credit will not help, because one of the factors used to calculate one’s credit score is how frequently one uses credit. More use of credit helps contribute to rebuilding it.
In our next post, we’ll continue looking at this topic.