What Will My Credit Rating Be After Bankruptcy?

One of the reasons many people fear bankruptcy is the impact it will have on their credit rating. Despite what you hear in those ads from debt settlement companies telling you not to worry about your credit rating since it can be improved over time, the question remains – how bad will it be and how long will it take before I can get credit again?

The simple truth is that bankruptcy can destroy your credit rating, but not for life. In Canada, the bankruptcy will remain on your credit report for 6 years after you have been discharged. Obviously, the implication is you should look to get discharged as quickly as possible. Consult a licensed bankruptcy trustee to see how you can get discharged in as little as nine months.

Accept the fact that declaring bankruptcy is telling future creditors you have a history of not being able to meet your financial obligations and start working on repairing your credit rating as soon as you file. There’s an upside to this picture as bankruptcy also tells potential creditors you don’t owe anybody any money; so while you may have to pay more for credit shortly after bankruptcy, you’ll be please to know in most cases you will be able to get it. Here are some practical things you can do.

First, start saving money. Once you are discharged you can start putting the money you no longer have to pay your creditors into a savings account. Once you have a reasonable amount saved, go to a bank and tell them you are trying to reestablish your credit. If you have $1500 in savings, borrow $1,000 from them, and then pay it back. You’re establishing yourself again as someone who pays his or her bills on time.

Second, get a secured credit card. These are generally low limit cards, linked to a bank account. While some have high interest rates, if you use the cards and pay the balance each month you are once again saying to the credit world you can pay your bills on time.

Third, as soon as you’ve begun to establish a track record of repayment on secured credit cards and loans, go out and buy a car. Car loans can be easier to get since they are secured by the vehicle and they are easier for the creditor to repossess than is a home.

If you doubt that this is possible, check the Internet discussion forums and you’ll find many people have rebuilt their credit in as little as a year.