One of the most common reasons that people cite for not wanting to file bankruptcy is simply that they believe it will ruin their credit. They are wary of doing anything that will make it harder to get a loan in the future.
It is true that bankruptcy can lower your credit score, but it is not true that this ruins your score forever. It can certainly be rebuilt. Let’s take a look at some of the ways to do that.
Eliminate your debt and stop missing payments
The first thing to consider is that all of your missed payments before you file for bankruptcy are already damaging your credit score. If you do nothing, it’s just going to keep going down. By using bankruptcy to eliminate your debt, you make it possible to get future payments in on time. This can reverse the direction your score has been going all along.
Use a secured credit card
Getting a normal credit card may prove difficult, but a secured card lets you put money down and then borrow against that down payment. This removes the risk for the lender, which means they’re more likely to give you the card. When you then make your payments on time, your score starts to increase again, and you can eventually get other lines of credit to help with the process.
Work with someone who will co-sign
If you have family members who are willing to help you, you can have them co-sign on loans, cards and lines of credit. This means they are responsible if you do not pay, so they take on that risk, not the lender. Since they know you and trust that you will pay, this can be a good way to get access to funds you would have otherwise, and you can then make these consistent payments to build up your score.
Bankruptcy is a viable tool
Worrying about the future is natural, but rest assured that bankruptcy is a useful tool. You need to know as much as you can about how and when to use it.