Many people who file for bankruptcy protection have an understandable aversion to credit. It might seem that if you stick to cash, you "can't get into debt trouble again", but it's important to not give up on credit just because you filed bankruptcy papers.
Now, your credit score will be affected when you file for bankruptcy BUT you can improve your score by starting slowly with credit cards after your bankruptcy is complete. Chances are your score wasn't that great before you filed, so look at your post-bankruptcy credit score as an opportunity to rebuild your credit.
A bankruptcy can stay on your credit report for up to 10 years. But as long as you work to rebuild your credit, you you don't have to suffer the same low score during that time period.
It may initially be hard to get good rates on new credit cards, but it can be a good idea to get one or two cards and -- this is important! -- only charge what you can afford to pay off each month. Over time, this will really help clean up your credit history.
It is also possible to qualify for home or car loans after a bankruptcy; however, you probably won't get the best terms as someone who has a better credit score.
Ask a bankruptcy lawyer how your credit may be affected after a bankruptcy:
Good question. You already know that credit can be risky, and you've probably learned that you can expect to pay higher interest rates shortly after filing bankruptcy, so why would you want to apply for new credit at all?
The simple answer is that certain purchases in our society virtually require credit. It's unlikely, for example, that you will ever purchase a home with cash. Even a smaller purchase, like a new vehicle, may require financing. After bankruptcy, you may feel that that smart thing to do is avoid credit until you really need it, and to restrict your credit to the big-ticket items that really require it.
Unfortunately, lenders aren't likely to cooperate with your plan.
If you're planning to go a couple of years without credit and then finance a house or a car when your finances have been stable for a while, you may be in for a surprise. The problem is, there won't be any record of your newly stable finances. If you want a loan from a reputable mortgage or auto finance company, the lender will want to see that you've demonstrated good financial management since your bankruptcy.
They'll look to your credit report, and if you haven't used credit since your bankruptcy, they won't see anything there except the bankruptcy! You might feel that you've proven yourself by living successfully on cash for two or three years, but by your lenders' standards those two or three years won't exist at all. Your credit score won't reflect anything except your bankruptcy.
In order to improve your credit score and make yourself a good candidate for a mortgage or car loan at a reasonable interest rate, you'll likely want to begin immediately to rebuild your credit.
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