Dealing with one's credit is an ongoing job and can be stressful at times. When finances are tight and payments get missed, credit can be affected quite quickly. One of the most worrisome times for individuals is in delinquency. Debts become burdensome and even the idea of bankruptcy can seem overwhelming. Further, most people tend to view bankruptcy as being bad for their credit, a myth that should be more carefully reviewed.
Credit During Bankruptcy
The hard truth is that bankruptcy does not damage your credit, missed payments and delinquent accounts do. By the time a person ever files for bankruptcy they have most certainly missed a few payments or carry a delinquent account standing. This means that the damage has already been done long before a bankruptcy filing.
The interesting thing about credit when in bankruptcy is that everything stops. Once the automatic stay order is issued, creditors cannot collect on debts. No debt collection means that they have nothing further to report to credit bureaus, essentially freezing one's credit standing. Debtors typically find that their credit report does not change while in bankruptcy, which can be a good thing. However, once a debt discharge is received, credit standings can change in a matter of days.
Credit After Bankruptcy
One of the best things about filing for bankruptcy is the chance to start over. Not only will a debtor find relief from their debts, but negative account histories are erased and delinquent accounts become current. With such negative information eliminated from one's account history, the negative credit standing also improves. When debts become resolved and creditors report positive account information the credit report is updated to reflect these changes. It isn't uncommon for a debtor to find an immediate improvement in their credit score and standing right away.
It wouldn't be fair to say that securing credit after bankruptcy is easy, but it is far from impossible. The fact that finding good lines of credit after a bankruptcy can be challenging is where people tend to assume the worst. In fact, there are plenty of creditors that lend to post-bankruptcy consumer as their main audience. While these lines of credit may not hold the ideal terms and conditions, they certainly don't exclude a debtor from having a chance at rebuilding their credit lives either. The trick for post-bankruptcy borrowers is to shop around and find a low limit card with the best interest rate to begin the process. Simple and small charges, followed by consistent payment patterns can put anyone on the fast track to good credit.