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Does a Bankruptcy Filing Have a Permanent Negative Effect on My Credit Score?

The first thing to understand is that filing bankruptcy is not the root cause of a poor credit score. In fact, bankruptcy can be an important step toward improving your credit score in the future. The credit counseling you must pursue as a prerequisite to filing bankruptcy provides valuable information on how to handle your finances responsibly after the discharge. However, you also need to learn how to get credit after bankruptcy to rebuild your credit rating over time.

When working to rebuild your credit score, it helps to know that Fair Isaac Corporation (FICO) bases the majority of its score on two factors:

  • Payment history represents 35 percent of the score, looking at whether you have paid past credit accounts on time.
  • Amounts owed represent 30 percent of the score and examines a variety of factors. For example, having numerous accounts with balances may indicate a higher risk. Yet carrying small balances on a few credit cards without missing payments may prove a greater degree of financial responsibility.

One of the most important credit tips for after bankruptcy is to find ways to establish credit and demonstrate your ability to use it responsibly. You may not be able to obtain a typical bank credit card immediately. However, you can begin by applying for a secured credit card and prepaying the credit limit. As you use the card for purchases and pay the bills promptly, your credit score improves over time. Eventually, you can qualify for retail or gas cards and prove your ability to responsibly handle unsecured credit.

The services provided by the Law Offices of Michael Jay Berger do not stop at the moment of bankruptcy discharge. We remain available to advise you on the steps needed to rebuild your credit for a fresh financial start.

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