Many people consider bankruptcy to be a last resort, but it can also be a fresh start for many people facing too much debt. If you are considering bankruptcy, your biggest concern may be your credit score.
Understanding what to expect of your credit score can help you navigate bankruptcy with fewer fears.
What to expect of your credit score
How low your credit score drops depends on what you started with. There is no hard and fast rule, but if you have a score over 800, you can expect a 200-point drop. However, if you have a credit score under 600, your credit may only drop 130 to 150 points.
While a Chapter 7 bankruptcy remains on your credit score for 10 years, your credit score increases more quickly. Most people have a higher score within a couple of years.
How to rebuild your credit score
Do not expect to rebuild your credit right away. Most financial institutions will not offer you a traditional credit card directly following your bankruptcy. To rebuild your credit score, start with a secured credit card. Secured credit cards allow you to put a deposit down on the credit card and borrow from the deposit. Over time, the secured card will build your credit and, in many cases, you will qualify for an unsecured card.
While credit scores are an important component of your overall financial health, they are also easy to rebuild. Bankruptcy provides a second chance to those who need help controlling their debt. When buried under debt, many people watch their credit score continuously plummet.