After declaring bankruptcy, some people may feel hopeless and helpless. Although they no longer have mounds of debt, their credit score takes a big dip and it is hard to borrow money.
The good news is the effects of bankruptcy do not have to last a long time. It takes work and time to build back credit, but with diligence and responsibility it is possible. Do the following to bounce back quickly.
Evaluate reasons for bankruptcy
According to Forbes, one of the main things to do is analyze why bankruptcy occurred in the first place so that the same behaviors do not lead to money troubles in the future. For some people, bankruptcy was inevitable because of an unexpected situation such as a job loss or medical emergency. For others, it was because of fiscal irresponsibility, overspending and debt buildup.
Make and stick to a budget
If credit card debt and irresponsible spending was the reason, it is time to create a realistic budget. Expenses should be less than take-home income. If they are not, cut out extras until you are making more than you spend. It is also important to begin saving money so there is a fund for future emergencies.
Take steps to improve credit score
According to US News and World Report, a good way to start improving credit is with a credit card. Keep in mind it may be more challenging to find an issuer that is willing to give a credit card to a newly bankrupt person, but shop around. If unable to get a traditional credit card, look into getting a secured one. This type of card typically has a low line of credit, and it may require a deposit, but using it establishes credit. Make sure to pay it off in full every month to avoid high interest rates and another hit to credit.
