When You’re on the Brink of Bankruptcy: 3 Practical Ways to Salvage Your Credit
When you are on the edge of filing for bankruptcy, your credit score could likely use some work. Getting behind on payments and having amounts in collections is horrible for your credit, but for many people that are considering bankruptcy, there is little they can do to meet their monthly obligations.
Bankruptcy does harm your credit, and the fact that you filed bankruptcy can be on your credit report for up to ten years. That is one of the many reasons that people avoid filing for bankruptcy if it is at all possible. Thankfully, there are a few alternatives that you can use to both prevent bankruptcy and minimize the damage to your credit.
- Make Timely Payments.
Your credit history makes up a whopping 35 percent of your credit score. It is essential.
It is easy just to tell clients that they should make their monthly payments on a timely basis. However, when they do not have the funds to do that, even meeting regular obligations can be a struggle.
What you can do instead is work with your creditors to come up with a payment plan that will meet your needs. Sometimes creditors will be willing to work with you if you tell them you are considering filing bankruptcy; an unsecured creditor is often much more likely to get paid if you do not go into bankruptcy. Maxwell Dunn can help you determine if this potential bankruptcy alternative may be an option in your situation.
- Avoid Adding New Credit.
When you are struggling financially, it is very tempting to take advantage of those offers that seem to show up in the mail on a weekly basis that offer a balance transfer option. You think that you will be able to transfer your debt to another lender and make it more manageable. Unfortunately, this is a temporary solution that will likely hurt your credit score.
Every new inquiry on your credit report is likely to drop your credit score at least ten points. If you want to pay off debt without harming your credit, focus on the accounts you have instead of opening new ones.
There are situations where debt consolidation into one sizeable personal loan may be a good idea, however. While they will need to pull your credit to see if you qualify, having one large payment with potentially a lower interest rate may be a good idea for you.
- Keep Going.
The hardest part of rebuilding credit and paying off debt is that it takes time. You may need to endure collection calls and less than polite letters about your obligations for some time before you get back on your feet. While it may not seem like you are making any progress, keep in mind that every payment you make is one step closer to being debt free.
If you are considering bankruptcy and want to know your options, the team at Maxwell Dunn can help. We can also walk you through some potential bankruptcy alternatives that you may want to consider as well. Call (248) 246-1166 today to schedule an appointment.See all videos