Filing for bankruptcy is the route to take when you can’t pay back a debt that’s become difficult to manage. According to Capital One, a major downside is that bankruptcy can stay on your credit for seven to 10 years, depending on your credit reporting agency. So, what can you do to get your credit score back up after filing for bankruptcy? Here are some pointers.
Pay Your Energy Bills On-Time
Bills can pile up fast when you forget to pay them or don’t have a solid strategy to keep them settled. After bankruptcy, you must think of ways to shine in good light wherever money is involved. In this case, pay your bills on time. Further, adjust your consumption to save more around the house so you keep your bill payments at a minimum. Save on utilities like water and electricity, and opt out of subscription and delivery services you seldom use.
Reports from the Department of Energy say you can save up to 10% yearly on heating and cooling by adjusting your thermostat back seven to 10 degrees for about eight hours a day. Energy costs are the highest in most households. To keep your energy bill low, start by changing your HVAC filter. Changing your HVAC system’s air filter can reduce energy consumption by 5% to 15%. Paying your bills on time saves you from incurring lateness fees and penalties or getting your power or phone cut off.
Avoid Large Purchases for Now
The focus shouldn’t be on spending when declared bankrupt. Instead, save, save, save! Making a large purchase can throw your finances off, leaving you worse off than you were before the big buy. The authorities and lenders closely monitor you and your spending when declared bankrupt. Therefore, making large purchases like buying a house can look like bankruptcy fraud. What’s more, these expenses can add up fast. SoFi Learn revealed that as of January 12th, 2023, a typical 30-year fixed mortgage had an interest rate of 6.33%. Making large purchases can jeopardize your plan to mend your credit after filing for bankruptcy. It might leave you struggling to finance daily expenses, let alone weekly or monthly debt payments. Temperance and financial discipline are key after filing for bankruptcy.
Practice Good Credit Habits
If you successfully convince a lender to extend your credit, ensure you keep your word and make your payments on time. When rebuilding your credit, it’s crucial to avoid doing anything that can hurt your credit further than it already is. If you’re bankrupt because you borrowed more than your income could service, take measures to keep a low income-to-debt ratio to guarantee a steady trajectory on your quest to improve your credit.
Your credit habits significantly influence your credit score. While rebuilding your credit after bankruptcy, it’s imperative to prove to lenders that you’re financially responsible by making your payments on time and avoiding unnecessary spending.
Reduce How Often You Use Your Credit Card
Experts advise spending below 30% of your card limit to minimize debt and thus improve credit. Keep your credit card use at a minimum, irrespective of how much you want to spend on something or what season of the year it is. For example, maxing out your credit card to finance your next holiday makes little sense when the goal is to show you have financial discipline.
Credit cards are great to use when you’re bankrupt. Make sure you use as little as you can from your card balance and pay it off promptly and in full monthly. Avoid the temptation of falling into the same trap that got you in the bankruptcy predicament, to begin with. If it’s tempting for you to splurge with friends, it might be time to change your crowd.
It took time for you to reach the point of bankruptcy. As a result, it will take time for you to mend your reputation and improve your credit. While practicing financial responsibility is important, it’s also crucial to understand that the credit-rebuilding process takes time. Avoid falling for offers from credit repair agencies as a quick fix because it will land you in more trouble than you’re in now.
Keep track of your finances and keep spending to a minimum. In time, you’ll slowly raise your credit score and hopefully bid good riddance to the bankrupt label.