After bankruptcy, a FICO score is likely to be quite low. This occurs because the credit bureaus see filing bankruptcy as a way of getting out of the legal requirements to repay credit. However, any credit score that is low can be improved upon over a period of time. After filing bankruptcy, individuals have one of the best opportunities to rebuild their FICO score to a level higher than in the recent past.
Bankruptcy Can Help
Initially, after filing bankruptcy, an individual’s FICO score will drop. Keep in mind that most people who come to bankruptcy as a method of repaying debt do so because they are unable to make payments and continue along the same methods used previously. In other words, their credit score is likely already significantly lower than it could be. Bankruptcy will hurt the individual initially, but remaining with an debt that is difficult to pay over the long term will keep the credit score low long term.
It is up to the individual to determine the best method of repaying his or her debt and whether bankruptcy is the right choice. Those who do file bankruptcy will need to take steps to rebuild a FICO score within the first six to twelve months after the bankruptcy discharge. There are several ways to do this:
- Open up a secured credit card. This type of credit card has a credit limit equal to the amount the borrower deposits on the card to initiate the line of credit. Choose a secured debt card that reports to the credit agencies.
- Accept a high interest credit cards. Some lenders specialize in bad credit loans even for those with poor FICO scores. Wait for a lender to send an offer, agree to the best offer presented and then use this card very sparingly. Avoid surpassing the credit limit and make all payments on time.
- Open a Certificate of Deposit. Obtain a loan to open the CD. Make all payments on that loan over the lifetime of the CD. At the end of the term, the individual will have made money on the savings and will have improved his or her credit score by making on time payments.
It is also a good idea to consider financial management courses and resources to help reestablish good financial behavior.
Hire an Attorney
The good news is that an attorney can offer the guidance an individual needs to get out of debt through bankruptcy and help the individual to rebuild his or her FICO score as well. Hire an attorney to represent you.
