Though declaring Chapter 7 or Chapter 13 bankruptcy can help people and businesses in serious debt trouble, there is no denying that it limits their ability to borrow money, at least for a while.
However, this side effect of going through bankruptcy need not be permanent. With a careful financial strategy, individuals can soon find themselves able to get a mortgage or business loan on reasonable terms.
The most prominent way that bankruptcy affects your ability to borrow is by lowering your credit score. How much bankruptcy will pull down your score depends on how high it was beforehand. A high score may lose more than 200 points, while a lower credit score might lose less, maybe 150 to 180 points.
Once done with bankruptcy, you can begin repairing your credit score. Here are some strategies for doing so:
- Find out your credit score, and check it again regularly as time passes to make sure it is going up.
- Open a new bank account, to show financial stability.
- Get a secured credit card. This is a card that requires a cash deposit as collateral. Using a secured credit card is a good way to rebuild your credit, without the risk of spending more than you can afford.
- Also sign up for a gas card or a retail card, which usually don’t require good credit to apply.
- Of course, it is important to pay off all balances at the end of the month.
Declaring bankruptcy is not the end of the road, financially speaking. Instead, it is a chance to get on the right path toward stability.