Deciding to file for Chapter 7 bankruptcy may have been a difficult choice for you. Like many in New York, you may have worried about the stigma of bankruptcy and the way your family and friends would see you differently. However, your financial situation forced you to overcome these worries, and you now understand how great the relief can be when you are free from your overwhelming debt.
You may have another concern, however. Because you understand that the major credit reporting bureaus receive information regarding your bankruptcy, you may worry the damage to your credit rating will continue to make your financial situation complicated and frustrating. You may be relieved to know that it is possible to begin to rebuild your credit rating almost immediately after your bankruptcy.
Rebuilding your credit
It is very likely that by the time you decided to file for debt relief through bankruptcy, your credit rating was already suffering. You likely had delinquencies on credit card accounts, medical bills, car payments and your mortgage. Even if these had not affected your credit too badly, the bankruptcy may have dropped you down into the 500s. However, it is not an impossible mountain to climb to get back up to a good score. Some steps include the following:
- Make good use of your pre-discharge credit counseling, especially your new skills for creating and following a budget.
- Start right away to build an emergency fund so you do not have to make desperate financial moves if you face unexpected expenses.
- Monitor your credit score each month, and quickly dispute any mistakes.
- Apply for a secured loan or credit card, which involves a credit limit based on your deposits.
- Ask someone to co-sign on a loan, but be certain you will not leave the co-signer holding the entire loan if you can't pay.
- Don't apply for too much credit at once because each inquiry into your credit may cause your score to drop slightly.
One important thing to remember is that the impact your bankruptcy has in the eyes of future creditors will fade. As long as potential creditors see you are now paying your bills on time and making a decent income, you will have a good chance of obtaining the financing you need. In addition to the steps listed above, your attorney may have other resources to help you move in a positive direction after your bankruptcy.