Will Bankruptcy Negatively Impact My Credit Score?
Bankruptcy is not a situation in which anyone would like to find himself/herself; however, it may serve as a solution for many people. For many people in deep financial trouble, bankruptcy offers the best solution to discharge or restructure debt, and opens the doors to a fresh start. Whether a person files chapter 7 bankruptcy, liquidating assets and dissolving debt, or chapter 13, setting up a payment plan for a certain period of time, or any other type of bankruptcy - there are six - the issue is that bankruptcy affects and lowers/damages your FICO score. This negative effect will look worse on someone who had a good or excellent credit score, as the numbers will plunge dramatically. On the other hand, if an individual had a low score to begin with, then the impact is not so dramatically seen in the numbers shown. However, good or bad credit, bankruptcy has financial and emotional repercussions in people's lives.
For people who have lower scores the cards play better since the credit report will remove the unpaid debt, late payments ... and categorize it under "included under bankruptcy #"which puts the debtor into a different pool of consumers, the bankruptcy group. This only means that when figuring out the debtor credit score, it will be compared against other people under bankruptcy, and not with people of good or perfect score - in that scenario, a person's low credit score may even improve after bankruptcy. Therefore, it depends on the beginning credit score. This only seems true for people with low FICO scores and not for people who had higher credit scores before bankruptcy.
However, for both groups of people, the climb to obtain a good or excellent credit score in the future will be a long one and one that will take much effort, discipline, and financial stability. However, once the mark of bankruptcy is erased in your credit report by the pass of time, it is possible to obtain a good credit rating if you are diligent and manage your finances wisely.
For this to happen, it is important that you check your credit after you file chapter 7, and make sure that you have a $0 balance with the creditors included in the bankruptcy. A creditor should not continue to report the account after bankruptcy arrangements. Fix this with the credit bureaus and the creditor as soon as possible, otherwise your credit score will continue to suffer.
Although not a good idea to get credit cards, if you want to build a new score you will have to start creating new credit, and paying in time, to build new data in your report. If you are an additional credit card user in someone's account, you will benefit from the good credit of the person. Loans will be available however, not from the best banks, but it will be a start. For mortgages, they require a couple years of good credit for you to be approved for a new mortgage; however, that does not mean that you will get the best interest rates - you will just be approved for a loan, to start rebuilding a good credit history. For more information on this topic visit restartcentral.com.