If you’ve been struggling to recover after a financial crisis, you’re definitely not alone, as many people in Tennessee and throughout the country have been experiencing similar issues. Perhaps you’re considering viable debt relief options but are unsure how a specific option might affect your finances in the long run. For instance, many people are hesitant to file for bankruptcy because they think it will ruin their credit score.
While it’s true that filing for bankruptcy would be in your credit report, it’s not necessarily true that it will prevent you from ever having a strong credit rating again. In fact, there are several things you can do after filing for bankruptcy to help you rebuild your credit rating.
Consider obtaining a secure or credit-builder loan
These two forms of financial loan vary slightly in processing. However, each of them can help you rebuild your credit rating after bankruptcy. With a secure loan, you are borrowing money against existing funds in your own savings account. A credit-builder loan, on the other hand, involves a lender holding funds in your name in a secured account.
The financial institution in question will report your payment activity to all major credit bureaus. As long as you are consistently making payments on time, this can help you increase your credit score over time.
Develop good credit habits to improve your overall score
The last thing you’d want to do after filing for bankruptcy is to take out a loan and fail to make payments or run up a high balance on a credit card. Improving your credit score will be much easier if you practice responsible habits. For instance, avoid using credit as cash. Only make purchases on credit if you have funds available to pay off the balance on time.
Try to set funds aside for emergencies. This way, if your car breaks down or you have an unexpected medical bill, you won’t run up a balance on your credit card because you’ll have funds ready to help offset expenses.
Acting as an authorized user on another person’s credit account
Another way to help improve your credit rating after filing for bankruptcy is to become an authorized user on another person’s credit card account. Because you’re not the owner of the account, you can’t modify it in any way. You can, however, have your name on a usable card, then make purchases and timely payments reported to credit bureaus toward your own credit rating.
It’s important to remember that most financial crises are temporary. Although filing for bankruptcy does show on your credit report, it doesn’t stay there forever. Chapter 13 bankruptcy typically disappears from a credit report in seven years, and Chapter 7 remains on a report for 10 years. In the meantime, there are numerous things you can do to help rebuild your credit score and lay the groundwork for a stronger financial future.