Filing for chapter 7 bankruptcy may give you a fresh start, but if you do not make some changes, you could find yourself in financial trouble sometime in the future. The good news is there are a number of steps you can take to get you back on track.
Making necessary financial changes will not only help prevent you from drowning in debt again, but it will also improve your credit score, which helps you eventually buy a house and get lower interest rates on mortgage, auto and other loans.
Immediate changes to make
According to U.S. News and World Report, the first thing to do is analyze why the bankruptcy occurred in the first place. If it was due to an unexpected circumstance, such as medical bills or a job loss, and you are normally good with spending under budget, perhaps your financial goal should be to save more money so you have reserves for emergencies.
If the bankruptcy was due to constant overspending and debt buildup, it is time to make (and stick to) a budget. Add up all your sources of income and your necessary expenses for the month. Subtract the expenses from income, and the remainder is your extra spending money. Review the budget monthly to make sure you are staying on track, and make changes as necessary.
How to improve your credit score
CNBC discusses how to build your credit score. A great way is to get a secured credit card, which uses deposited money as a credit line and counts towards your credit just like a regular card. Plus, it prevents you from overspending and building up credit card debt.
Some additional ways to build credit:
- Pay all bills in full and on time
- Avoid applying for multiple credit cards
- Join a program that allows you to build credit by paying for cell phone, utilities, etc.
- Become an authorized user of a family member’s credit card
Even making little changes can improve your score quickly.