How does filing bankruptcy affect my credit?

Your credit score is very important. It can be reviewed prior to a job hiring, a bank issuing a personal loan, or before your landlord decides to rent you an apartment. So how will filing bankruptcy affect your credit?

First, if you file for bankruptcy the bankruptcy filing information will be sent to the credit reporting agencies and can have an immediate negative impact on your credit score. But the good news, if there is any, is that if you are considering filing bankruptcy most likely you already have very low credit scores.

For instance, a perfect credit score is 850. Credit scores can fluctuate between 300 and 850 points, with scores of less than 300 indicating the borrower does not have a credit history. So, if you file bankruptcy and your score was 850 (very unlikely) the most it would fall is 550 points. But, as mentioned above, the drop you can expect will only add to the drop you would have already seen over the last several months or years.

How do I rebuild my credit after bankruptcy?

Filing bankruptcy will allow most debtors a fresh financial start. Although your credit scores may remain low while the bankruptcy is on your credit report, there are some steps you can take immediately to improve your score.

How do you increase your score? The first step is to make sure you pay all of your bills on time and in full. This includes your credit cards, medical bills, utility bills and car payments. If you fail to pay your bills on time you can expect your credit score to remain low and continue to hurt your credit rating.

Can I get credit after I file bankruptcy?

Although it may be difficult to get a home loan after bankruptcy, at least for some time, you may be able to get other types of credit. For instance, there is a whole new class of lenders who target former bankrupt debtors as new customers. But if you do apply for any type of loan you can expect to pay a much higher interest rate than a customer who has a higher credit score. The higher interest rate is to help protect the lender against the risk involved with lending you money.

Additionally, because bankruptcy may allow some debtors to immediately eliminate their debt load, some creditors may see you as a valuable customer who may have an easier time repaying your debts.

Bankruptcy will remain on your credit report 7 to 10 years. During this time it may be difficult to make large purchases on credit, like purchasing a home. If you are planning to buy a home in the near future, consider whether filing bankruptcy is the best option for you.

Filing bankruptcy does not have to ruin your life, and your credit score does not have to control you. If you are considering bankruptcy, however, make sure you understand that bankruptcy will immediately have a negative effect on your credit score.

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