When you file for bankruptcy, your credit score will most likely decrease. You could see a decline of anywhere between 50 to 200 points depending on what your score was before filing. However, it is crucial to remember that this is usually only a short-term impact. If you are speaking with one of our Roseville, CA bankruptcy attorneys, chances are your credit score is not hovering around 800.
A bankruptcy will stay on your credit report for a significant amount of time. If you filed a Chapter 7, it will remain on your report for ten years. A Chapter 13 bankruptcy will be there for seven years. However, the negative impact will fade away over time. The most substantial adverse effects will be felt during the months following your filing.
Bankruptcy was designed to give you a fresh start by allowing you to eliminate your unsecured debt or reorganize your financial obligations. Filing for bankruptcy could be the first step in improving your financial future. If you are constantly late on payments or defaulting on loans, you are not only hurting your credit score; you are doing nothing to right the ship. Call The Bankruptcy Group at 1-800-920-5351 to discuss your options for a brighter future.
Does Filing for Bankruptcy Increase Your Credit Score?
When you file for bankruptcy, it will not increase your creditor score. A filer will almost always see a drop of 50 to 200 points, depending on their score before filing – the higher the score, the more significant the decline.
The bankruptcy will continue to impact your credit score until it is removed. However, by filing for bankruptcy, most debtors are eliminating a large amount of unsecured debt or are paying the arrears on secured debt. Discharging and paying off debts will also impact your credit score. For most bankruptcy debtors, the act of filing will put them in a position to improve their credit score in a faster and more efficient manner. Our experienced Folsom bankruptcy attorneys will thoroughly review your debt to help you understand what to expect.
Bankruptcy Has Advantages and Benefits
Most individuals who are considering filing for bankruptcy are not concerned with their credit score. After months or years of defaulting on loans or missing payments, their credit score is not their primary worry. When someone’s home is in foreclosure or their wages are being garnished, they are just looking for relief. Qualifying for a new credit card is not a priority – it is also probably not possible.
Filing for bankruptcy provides relief from overwhelming debt, foreclosures, and garnishments. It also puts the filer in a position to begin seriously thinking about building their credit score.
Short-Term Positive Bankruptcy Effects
There are some immediate positive impacts when you file for bankruptcy.
Removing Delinquent Reports
Your credit report likely lists late payments, high credit balances, and delinquent accounts. Each one of these items negatively impacts your credit score. These delinquent accounts could be eliminated through bankruptcy. Once reported as discharged, your credit score could see an immediate boost.
A percentage of your credit score is based on the amounts you owe on your various accounts. This amount and its relation to your available credit are what impacts your credit score. Bankruptcy often helps filers by improving their debt-to-credit ratio. The lower your debt is to your available credit, the higher your potential credit score could be.
Long-Term Positive Bankruptcy Effects
When you wipe your debt history clean through bankruptcy, you have the opportunity to start from scratch. You now have another chance to manage your finances and build your credit. By properly budgeting and sticking to it, you could lay the foundation for a better and more secure future.
Improving Your Credit Score After a Bankruptcy?
After you filed for bankruptcy, you will probably find it challenging to be approved for many types of credit cards. Part of this will depend on your circumstances, including what type of bankruptcy you filed and what debt was discharged or paid. However, you still have options available to start building your credit score.
The first piece of advice our knowledgeable bankruptcy lawyers give is to apply for a secured bank credit card. Even though a secured credit card is limited by the secured deposit you give the card issuer, it impacts your credit score in the same manner as an ordinary credit card. Because you must have an account, a secured credit card is much easier to obtain. For instance, if you want a card with a $1,000 credit limit, you must leave a $1,000 security deposit with the bank as collateral. In most cases, if you make all your payments on a timely basis, your deposit will be refunded within twelve to eighteen months.
In some cases, you could reaffirm an old debt, such as a car payment. When you reaffirm a debt, you are entering into a new agreement based on the old terms, and the debt is not discharged. By making monthly payments on a reaffirmed debt, you could improve your credit score.
Not every creditor reports discharged delinquent debts correctly. You should review your credit report seven or ten months after you receive a discharge to determine if your accounts are marked as discharged. If they still appear, our Sacramento bankruptcy attorneys could assist you in having the various credit bureaus report accounts as discharged.
To Discuss the Impacts of Filing, Call Our Experienced Bankruptcy Lawyers Today
Filing for bankruptcy is rarely an easy decision. However, it is often the quickest way to start improving your credit – even though your credit score will likely decrease when you file. The attorneys at The Bankruptcy Group are available to answer your questions and concerns about the entire bankruptcy process. To schedule a free appointment, call our law offices at 1-800-920-5351.