Filing for bankruptcy is not a decision to make lightly. It’s stressful to deal with mounting debt, but it’s also stressful to deal with the consequences of bankruptcy. You may be worried about your credit score since a bankruptcy stays on your credit report for seven to 10 years. In today’s blog from Groce & DeArmon, we discuss how bankruptcy affects your credit score.
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Bankruptcy Doesn’t Ruin Your Credit Forever
In reality, most people’s credit scores see positive upward movement as soon as six months after a bankruptcy. The key is how well you handle paying creditors during the bankruptcy process. Groce & DeArmon can explain what lines of credit you can and cannot eliminate in bankruptcy.
What Discharging Debt Does to Your Credit Score
Your credit score indicates to creditors how much risk you represent as a borrower. Post-bankruptcy, your credit score will be affected by the terms of your bankruptcy filing, how recently it was filed, and how you’ve handled payments since then.
Defaulting on several accounts with large balances has a greater effect on your credit score compared to defaulting on smaller debts. The ratio between discharged (negative) accounts and positive accounts may also affect your credit. The bankruptcy attorneys at Groce & DeArmon can give you tips and tricks about how to go over your credit report to see what may happen once a discharge takes place.
Credit Score Isn’t the Only Factor
One thing to remember about credit and lending is that your credit score isn’t the only factor that lenders take into account when determining how much to loan you. You may still be able to get a small line of credit a few months after a bankruptcy, but it may be at a higher interest rate and a lower credit limit than before.
Start Building Credit ASAP
Filing for bankruptcy does lower your credit score, but you can start building a credit history immediately following the bankruptcy. Consider adding new credit, such as secured credit cards or small installments, to counter any negative information on your credit report. Make payments for these loans on time. Keep any credit card balances under 30% of your credit limit.
Making regular payments on time is the only way to improve your credit score. Yes, a bankruptcy will lower your credit rating. However, it’s not necessarily a dire situation. Groce & DeArmon can talk to you about how to improve your credit score following a bankruptcy filing. Bankruptcy will stay on your credit report for seven to 10 years, but the impact will lessen over time as you make regular payments to your existing debt.
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Call Groce & DeArmon About Bankruptcy Protection
Do you feel overwhelmed with your current debt load? Are creditors constantly contacting you at home and work? Chapter 7 or Chapter 13 bankruptcy may offer a solution for you. Contact Groce & DeArmon or call toll-free 1-800-640-3706 for more information or a free consultation about filing for bankruptcy.