Bankruptcy and My Credit Score

One of the biggest hesitations people have about bankruptcy is there credit score. It’s common knowledge that bankruptcy hits your credit score pretty hard. Your score will drop by at least 100 points upon filing, and your bankruptcy will stay on your credit report for either 7 or 10 years depending on the kind of bankruptcy you file. I have had clients get their score back into the 700’s within a year a filing. So, bankruptcy isn’t a death sentence for your credit, though it will take some work to get your score back up.

How to reestablish your credit.

Here are some ways you can build your credit back up if you’re dead set on doing so, though I can’t say I’d recommend it:

• Get a secured credit card.
• Don’t go nuts on all the credit card offers you’ll be getting, and be sure to pay off the cards you do open every month.
• Car loans are often easier to get than other kinds of loans because there is collateral. Though don’t tie yourself up with an unmanageable car payment.
• Check your credit score regularly. Call your credit report issuer if you see that something isn’t reported properly.

My Advice

In my opinion, you shouldn’t care about your credit score because you shouldn’t be using credit. Do you remember the anxiety of being in debt? Why would you do that to yourself all over again? Bankruptcy has given you a blank slate. Take advantage of it! Here is what I suggest:

• Cut up any new credit cards that come in the mail.
• Buy used, reliable cars and avoid car payments.
• Do a budget
• Make a habit of saving at least 10% of your income for a rainy day.
• Invest at least 10% of your income for retirement through a 401k or Roth IRA (or both!).

These suggestions aren’t popular or common, but that’s ok. If debt and financial chaos are common, I’d rather be uncommon. If you live in the Stockton area and are interest in the fresh start bankruptcy can bring, please give our Stockton bankruptcy office a call and I’d be happy to offer you a free consultation.