Bankruptcy does not ruin your credit score for years and years.
Many people are under the misconception that it does but it’s just not true. Bankruptcy can actually improve your credit score faster than anything else you could do.
Why it Works
Filing bankruptcy means that you no longer owe the debts that have been dragging down your credit report and your credit score. Lenders are not out there making judgments about you as a person; they don’t know you. They want to lend as much money to as many people where they will make the most interest on their money. This means they actively seek out people who have recently filed bankruptcy: they know you don’t owe any of your old debts anymore, so you can concentrate on paying them interest on the new loans of money they make to you.
Credit Cards are often the first step
It may seem wrong to take on a credit card right after eliminating old ones. But accepting an offer for a new credit card can be very smart. They are easier to use for many transactions and they can help re-build credit and raise your credit score.
Co-signors and secured credit cards
If you are not able to get a credit card in your name alone as quickly as you’d like, consider getting your name on someone else’s card or getting a secured credit card. A secured credit card is where you put some money up for the company to hold as collateral so they will give you credit up to that amount. The important thing is that the credit available to you shows on your credit report.
The magical credit utilization rate
To get a good credit score quickly, your credit utilization rate is probably the most important factor. Credit scores are calculated on how much you owe, compared to how much you have available to you that you haven’t used. Say you have a credit card with a $1,000 credit line. If you never let the card get over $300 in charges before you pay it off, you’ve only used 30% of the credit available to you. This is the gold standard. Having only a 30% utilization rate will be the biggest factor in your credit score.
Peter Blinn, Bankruptcy Attorney, Ocala Florida
For over 30 years, listening to clients and putting them at ease, while finding solutions and helping achieve future goals, in Ocala, Florida and surrounding counties.
