How Bankruptcy Can Affect Your Credit Score

Are you afraid of how a bankruptcy credit score will affect your buying power? For sure, successfully filing for bankruptcy may eliminate debt collectors, penalties and fees charged for default payments, lawsuits, and various legal threats. The impact of filing for bankruptcy can be traumatic. And the smoke and mirrors that come with a bankruptcy credit score is nothing to sneeze at.

Now, I don’t plan to make a mountain out of a molehill. But if you have filed for bankruptcy, you must consider what it will take to rebuild your credit. In addition, you need to be sure to be smart about how you use your credit, while also providing a good explanation for the bankruptcy in your credit file.

To make a long story short, you need to understand how your credit life will work after bankruptcy. Pay close attention as I take a no holes barred approach to how filing bankruptcy can affect your credit.

In a nutshell, bankruptcies will be listed on your credit report in the public records section. This mark remains on a credit report for at least 10 years. Understand this,your bankruptcy credit score will be at least 100 point lower than it was before you filed.

What this means for you is lenders and creditors can increase your interest rates or even decline future credit because of the bankruptcy as a result of your low credit score. But, you shouldn’t stress too much about it. Lenders exist who will extend credit to you even though you’ve went through a bankruptcy. In brief, the lenders are aware that you’ll be unable to file for bankruptcy again for 8 years in the case of chapter 7 and 4 years in the case of chapter 13. So the likelihood of you paying them on time is great, and more importantly, they can charge you higher interest rates.

And here’s something else I want to say…the higher your credit rating before the bankruptcy, the more dramatic the drop of your credit rating will be after the bankruptcy. But, on the other hand, if your credit was bad before filing for bankruptcy, the bankruptcy will not cause your credit score to drop that much.

One excellent practice is to prepare a written statement describing legitimate reasons to seek protection from bankruptcy.. Many businesses will work with people who went bankrupt as long as they have a good reason. This statement won’t be included in the one hundred word statement customers can add to their credit file. Instead, this is a verbal statement that you should consider making to creditor that will pull your credit report before completing business and credit transactions.

Without a doubt, your bankruptcy credit score will play a large role in lenders decisions to offer you credit. But, take the road less traveled and recognize what you are getting yourself into. After all,Don’t be silly and apply for credit that is going to result in you losing all that you have..