Millions of consumers, unable to deal with the financial pressures of the economy, have filed for bankruptcy. But what can bankrupt consumers do to pull themselves out of what seems like a financial black hole?
According to the Wall Street Journal, bankruptcy filings shot up 21 percent in the past year to 1.51 million. While these consumers’ credit ratings have taken a massive hit, all is not lost, according to the news source.
“It’s the single worst thing you can do to your credit rating, but the good news is that you can recover from a bankruptcy,” Craig Watts, public affairs manager for FICO told the news source.
First, buyers should know that even with bad credit, they may be pre-approved for things like a car loan. Making payments on a car loan or other financial obligation is the best way to improve their credit score once they’re back on their feet.
For many consumers, the toughest part after bankruptcy is establishing credit again. Staying away from credit may be beneficial financially, but it won’t help buyers improve their bad credit scores. For that, borrowers need to generate activity. A few companies will still offer credit cards to recently bankrupt consumers – with high interest rates. But if buyers pay these cards off on time, they can improve their score. It will take time, but bankruptcy isn’t the end – it’s a new beginning.