There’s a persisting myth that bankruptcy will ruin your credit score for good. But with more middle class Americans than ever filing for bankruptcy, it’s a myth that’s hopefully about to come to an end.

Millions of folks who are unemployed or at risk of foreclosure are turning to bankruptcy for a fresh financial start. Unfortunately, millions more choose to handle their debt alone because they fear that bankruptcy will damage their credit score. In reality, not filing for bankruptcy could be doing a lot more harm.
As we discussed earlier this week, a credit score isn’t a judgment about your character – it’s just a tool lenders use to gauge how risky of a borrower you are. Since your behavior as a borrower can change, that means your credit score can change, too.

Even if your score factors in a bankruptcy filing, the actual impact of that filing on your risk can decrease over time if you are able to improve other areas of your credit. And filing for bankruptcy is one of the most effective ways to start cleaning up your finances. Once your debt is under control, you’ll have an easier time making on-time payments, staying well below your credit limit and paying off your balance each month – all things that will help build a better credit score.

If you don’t trust yourself with a regular credit card, a helpful way to rebuild credit is by opening a no-fee secured credit card account. You’ll deposit an amount in a bank – a few hundred dollars, for instance – and use your card to make purchases up to that amount. This way, you can prove your ability to make credit payments, but you don’t have to worry about spending more than you can afford or exceeding your limit, since you’ve got collateral in the bank.

Of course, if you’re unsure about how bankruptcy will affect your finances – or need more information about improving your credit score – you can find free advice on saving, budgeting and bankruptcy at a community financial workshop courtesy of Debt Stoppers. Can’t wait? Sign up for a free personalized debt analysis with an Reglement Legal today.