How Does Filing for Bankruptcy Affect your Credit Score?
Bankruptcy is a frustrating situation, whether for a business or an individual. You can never imagine reaching a situation where you have to file for bankruptcy. But this is the only legal way to get rid of your debt and reorganize your life.
But despite the relief that comes with signing for bankruptcy, think about your future borrowing situation. How will filing for bankruptcy affect your credit score?
It Affects How Your Credit Reports Looks
Even if you file for bankruptcy, there’re still bills you’ve struggled to pay in the past. These bills will be in your bankruptcy filing. They have space in your credit reports. Even if you settled them, they’d appear in your bankruptcy with no balance. These settled bills cannot disappear on your credit reports.
Lenders may also use the credit reports they got from your bankruptcy file to deny you any loan application. But the positive side is that the accounts you included in the bankruptcy filing can no longer be reported as the due or past due date. This can improve your credit scores.
It Can Affect Your Credit Recovery
Your credit recovery will be an uphill task after filing bankruptcy. You’ll need to have a lot of patience before you start earning points on your credit card. You can take simple steps by creating a list of all debts included in your bankruptcy.
Check them on your credit cards too. They might take some time to get updated in your reports after they’ve been discharged.
Ensure the negative marks get erased by checking your reports after one or two months to avoid errors. If you have a no credit check loan, clear it. Build your credit score with a secured credit card. Take an affordable credit line so you’ll pay back on time. Such behavior will increase your credit score.
It Can Take Long To Get Back Your Credit
Of course, your credit is not lost forever when you file for bankruptcy. Once your bankruptcy is over, you can rebuild your credit score by putting your finances back on track.
You have to build a positive payment history with your new creditors. Once you clear your name and improve your payment history, it won’t take long before you get back on track.
To have less credit impact on your reports, make sure you add more positive information on your credit. Bankruptcy will take up to ten years on your credit report. Take simple steps to improve your credit score, even if it takes time.
It Can Build Your Credit Score
After getting discharged from your bankruptcy, many lenders will be very willing to work with you. After seven or ten years, many lenders will be offering you credit cards because they know you won’t file for bankruptcy in several years.
Getting loan offers from many lenders will no doubt improve your credit score.
You have to be more vigilant on the credit cards that come on your way. Don’t get too excited that you forget to check on the fees, interest rates, and other details.