Old myths die hard, and bankruptcy is no exception.
One-third more people filed for bankruptcy in 2009 than in 2008 - and numbers could be much higher for 2010. However, it's likely that that even more folks are eligible to file - and therefore receive the help they need to reduce debt - but are choosing to avoid bankruptcy because they fear it will wreak havoc on their credit, say Chicago bankruptcy attorneys. It's true that bankruptcy can stay on your credit report for at least seven years. But it's also true that the impact diminishes over time, especially if you improve your behavior as a borrower - exactly what filing for bankruptcy can help you accomplish.
Your credit score is simply a way for lenders to quantify your risk level as a borrower. And since your behavior can change, so can your score. Bankruptcy can lower your score because it indicates you've had past financial trouble, but things like carrying large debt, making late payments, and approaching or exceeding your credit limit all indicate you're having current financial trouble.
The most important step to rebuilding credit is showing that you can use credit responsibly. Bankruptcy can help you get there by making your debt more manageable. Once you've got more leeway, you can start adjusting your behavior. If you have bankruptcy payments, make them on time. Try to use a small amount of your available credit - no more than 30% -- each month and pay off your balance with every bill, as it's a myth that carrying a balance helps your credit.
Don't have any credit card accounts to use? Consider getting a no-fee secured credit card, a credit option available for troubled borrowers. Some banks will allow you to deposit an upfront balance - say, $500 - which becomes your "secured" credit limit. It also helps to prove you can pay off installment loans - if you already have a car loan or student debt, simply making payments on time will help rebuild your credit.
Curious about how bankruptcy will affect your credit? Need help staying on track while rebuilding your credit score? Find free tips on budgeting, saving, investing and, of course, bankruptcy when you attend a community financial workshop in Chicago. Or set up an appointment for a free personal debt analysis with a Chicago bankruptcy attorney today.
