Bankruptcy allows people to relieve large amounts of debt within a very short amount of time. However, an opportunity such as bankruptcy does come at a cost – filers may notice their credit score drop after a successful bankruptcy filing.
The impact on a filer’s credit score after filing for bankruptcy is unique for each person — whether that is just a few dozen points or a couple of hundred. While this is a significant concern, it is important to remember that most people who are struggling with overwhelming debt already have damaged credit. A drop in their score may not impact them as much as they think, and bankruptcy gives them the chance to rebuild that score over time. In other words, the “hit” to someone’s credit can be temporary. The most significant thing to remember is that filers can raise their credit score by reading the following:
How a lower credit score can affect your opportunities
The main effect of a lower credit score is that bankruptcy filers will often have fewer loan and credit card opportunities. That typically does not stop filers from applying for credit cards and loans; instead, filers may find that they have a higher interest rate. In many cases, filers may find that their ability to secure a loan or new credit actually improves after bankruptcy, thanks to services that are dedicated to just that group of consumers.
How you can raise your credit score with the right steps
Filers can take steps to raise their credit score after a successful bankruptcy filing. Some options available include:
- Build a budget
- Make consistent payments
- Get a secured credit card
- Become an authorized user of a shared credit card
- Monitor credit score changes
It often takes time and commitment to raise a credit score after bankruptcy. Once a filer raises their credit score again, they may have better credit card and loan options.
A lower credit score is often a small price to pay for debt relief. Anybody who is struggling with overwhelming debt may want to learn more about their bankruptcy options.