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A bankruptcy does not ruin your credit forever

After months or even years of struggling to keep up with your debts, you finally found financial relief through Chapter 7 bankruptcy. While your Tennessee friends and family may have warned you that filing for bankruptcy would ruin your credit, you knew the delinquencies you experienced had already damaged your score.

Rather than continue to struggle and watch your credit rating sink lower, you opted to seek relief. After your bankruptcy, your credit score may be low, but it may not be as bad as you think it is. Fortunately, you can begin to repair and rebuild your credit almost immediately after your bankruptcy.

Baby steps to repair your credit

If you do not have a budget in place to manage your spending, now is the time to implement one. Your bankruptcy likely included a requirement that you undergo credit counseling, which may have provided you with skills to create and maintain a budget. You can always refer to this information or contact your counselor for more help in this area.

Your next step is to establish an emergency fund, so you have options if you run into a financial crisis. Even as little as $250 set aside for an emergency can prevent you from racking up credit card debt you do not need. As you build your emergency fund, you can also do the following:

  • Monitor your credit report to make sure the information is accurate.
  • Dispute any errors that appear on your report.
  • Rebuild your credit history with a secured loan, which involves borrowing from funds you deposit into your account.
  • Apply for a secured credit card, which will help pave the way for unsecured credit.
  • Seek other ways to build your credit, such as finding a co-signer for a loan or obtaining authorized user status on someone else's credit card.
  • Discipline your use of any line of credit, and pay your bills in full on time.

A bankruptcy on your credit rating remains for 10 years. That may seem harsh, but it is important to understand that, two, five or seven years from now, that bankruptcy will not have the same impact on creditors as it does today. With every bill you pay on time and every wise financial decision, your score improves. Those who rely on your credit score for their decisions will see your progress and success from the point of your bankruptcy forward.

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