If you are in the midst of a bankruptcy or are considering filing, you probably wonder about bankruptcy’s effect on credit. While your concerns are valid, in some ways, bankruptcy may not have such an adverse effect on your credit as you might think. Many of your worst credit problems will be behind you once the bankruptcy is complete. At that point, you will be able to start rebuilding your credit, and you may find eventually that your position if better than it was before. In fact, those who have declared bankruptcy can often obtain new lines of credit within a year following the bankruptcy’s completion. You may find your first impulse following a bankruptcy is to avoid credit entirely; this is not necessary. If you have no new credit, your prior history will be the only information available to assess your credit, so it is better to start small and work diligently to demonstrate new evidence of your ability to repay a debt. One smart way to begin restructuring your credit after bankruptcy is to
open a secured credit card. Opening a secured credit card requires an initial cash deposit as collateral, which in turn becomes the credit for the account. In this way, a secured card is essentially the same as a debit account. However, the payments you make will likely be reported to the three major credit reporting agencies, which will mean that with consistent and timely repayment you should see your credit score start to improve. In some cases, the lender may add credit at a later date once you have established a history of repayment. Be sure that the bank you open your secured credit account with reports your payment information to the three credit bureaus so you can boost the good data in your credit report. Of course, a secured credit card is not an absolute necessity. Timely payment of your rent or mortgage and utility bills will demonstrate good management of your finances to show on your credit report.