Many consumers who end up filing for either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy plan may wait a while before making the decision to do this. One reason for the hesitation is the fear that a bankruptcy will create long-term damage to a person’s credit history. The reality is that a bankruptcy may provide an ideal point from which to rebuild a good credit history and score.
Anyone in need of bankruptcy relief has likely already experienced a decline in their credit due to potential missed or late payments on accounts. After a bankruptcy discharge, a person’s debt-to-income improves and it becomes time for them to focus on building a positive credit history. NerdWallet indicates that obtaining and using a secured credit card can help do this. Payments should be made in full and on time every month.
Credit Karma recommends that people should do a thorough review of their credit reports from all bureaus as errors may be present. These errors can be removed and potentially help a score. From there, regular tracking of a credit report and score is important.
Credit accounts from retail businesses may be another type of credit that consumers fresh out of bankruptcy may be able to obtain. As with a secured credit card, all payments should be made in a timely fashion to show the ability to use credit responsibly. For people who pay rent for their primary residence, they may request that their rental payment history is reported to the credit bureaus as would a mortgage payment history from a bank lender.