A legitimate fear behind filing for bankruptcy is the damage done to your credit. However, what most people don’t know is that the bulk of the damage done to your credit happens long before you even decide to file for bankruptcy.
The worst thing you can do to your credit is fail to pay your debts and let your account enter a delinquent status. Depending on the lender, you account may carry a delinquent status after just one missed payment. As soon as a creditor reports negative information about your account history to the credit bureau, your score will begin to drop.
Keeping Your Score Up
By the time you file for bankruptcy, your accounts have probably held a delinquent status for several months. However, this does not mean that you will be unable to improve your credit. In fact, bankruptcy resolves your debts with creditors and erases negative payment histories. Once your debts are discharged through bankruptcy, your accounts have been wiped clean and are ready for a fresh start.
The most important aspect to rebuilding your credit after bankruptcy is to monitor your credit standing. Make sure your creditors are reporting accurate information about your accounts and the changes are reflected in the reports. You may also want to obtain a letter from your previous creditor stating your accounts have been satisfied. This letter can be used to give new creditors when you get ready to apply for more credit.
The best way to rebuild your credit is through small, manageable credit balances that are paid on time. Do not take out new credit if you are not absolutely sure you can make timely payments. Once you can demonstrate yourself to be a responsible borrower, your past delinquencies and bankruptcy marks will be forgiven.