After bankruptcy proceedings have ended, many consumers may face fears that they will never get their finances back on track or repair their credit score. While bankruptcy will take a toll on their credit reports, it is not impossible for individuals to improve their credit and financial standing. Through time and responsible money management, Americans can begin to see improvements and work toward a stronger financial position.
There are several steps consumers must take in order to improve their standing. First and foremost, it’s imperative that all bills – including utilities, rent and even parking tickets – are paid in full and on time. Non-credit accounts do not appear on a consumer’s credit report unless they fall into default and are sold to a collections agency. As many municipalities and public service industries are struggling to make ends, many are quicker to send overdue payments to collections, even bills for small library fines and moving violations. For this reason, consumers should focus on keeping their existing accounts up-to-date.
Second, individuals should consider applying for a small and manageable credit line to start repairing their broken credit report and score. While credit may be difficult to secure due to their credit scores, applying for a secured credit card may be an option. Borrowers should keep in mind that the interest rate attached to their credit line is likely to be high. For this reason, consumers should avoid incurring balances that are higher than they can pay during the billing period. In addition, running up a large bill – even if they pay it off each month – can make them appear risky, which can have a negative impact on their credit score. Consumers should try to avoid using more than 30 percent of their available credit line.
Lastly, setting up and sticking to a budget is essential for those who are already in a precarious financial position. A strict money management plan can help consumers discipline their spending, avoid overextending themselves and ensure that all financial obligations are met. Studies show that relying primarily on cash can help individuals avoid overspending because seeing the physical money leaving their wallets may prompt them to rethink unnecessary purchases.
Overcoming bankruptcy can be accomplished by implementing wise spending and credit practices. For those who want assistance organizing their finances post-bankruptcy, credit counseling services can be instrumental in helping consumers get back on their feet.