When you’ve run into financial challenges and had to file for bankruptcy protection, there can be a misperception that your credit is ruined forever. There’s no question that your credit rating will take an immediate hit, but it’s always possible to rebuild it and you may be available for some levels of credit in a fairly short period of time.
The first thing to remember is that if you are drowning in debt you will not be able to pay and your credit record will show continuing defaults. A bankruptcy that allows you to get back to financial stability means you can start paying your expenses and current debt obligations when due. A bankruptcy discharge also reduces your total debt substantially. As a result, your credit score may well improve and improve a lot faster than if you had not filed bankruptcy.
Also, after you have had a period of time to show a good debt payment history, a bankruptcy in your past becomes less important.
Finally, when considering whether you are a good credit risk, certain creditorssuch a landlords will only view your credit score as one aspect of your eligibility. With that in mind, they may be willing to consider evidence that shows that your financial difficulties were an anomaly—something that only happened once and was tied to a specific event—an unanticipated medical emergency, for example. They may also be swayed if you can provide evidence that your financial challenges are in the past—that you have honored all your commitments in the months or years leading up to your application for credit.
There are, however, proactive measures that you can take to ensure that your credit rating moves in the right direction:
- Keep an eye on your credit—review your credit report at least once a year to ensure that there are no errors that reflect negatively on you
- Always pay your bills as early as possible.
- Keep on top of your budget so you know what you have to spend each month.
- Try to develop a financial cushion, ie a rainy day fund for the inevitable emergencies and unexpected expenses. Treat this like a personal loan. If you take money out of the fund, start paying it back.
- Try to have a credit card, and use it sparingly and pay the balance in full each month. For example, you could buy one tank of gas a month and pay that balance in full when the bill comes due.
- See if you can get a secured credit card and ask the issuer to report your use and payments to all credit reporting agencies
- After a couple years, you may want to apply for a small loan, such as a vehicle loan. Make certain that you make all payments in a timely manner. This requires, again, a well-thought out personal budget.
- Don’t close existing accounts that you have, as doing so typically lowers your credit score
Contact Neuner & Ventura, LLP
At Neuner & Ventura, LLP, weknow that the bankruptcy process can be intimidating and confusing. Weoffer a free initial consultation to every client. For an appointment, call our office at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.
Representing Clients across South Jersey