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How Will a Bankruptcy Affect My Credit Score?

February 22nd, 2019 at 3:47 pm

TX bankrtupcy lawyerOne of the biggest worries people have when they go to file for bankruptcy is what that will mean for their credit score. There is a lot of confusion surrounding bankruptcies and how they affect your credit. While it is true that they do negatively impact your credit score, it is not nearly as bad as some have let people believe. There is no one answer to how your bankruptcy will affect your credit score. It is a combination of what your credit score was before your bankruptcy and what appears on your credit report. Each situation is different and it is nearly impossible to say how a bankruptcy will affect your credit score.

Effects on Your Credit Score

While there is no simple way to tell how a bankruptcy will affect your credit score, FICO, one of the nation’s leading credit reporting bureaus, has released information on how bankruptcy and other credit mistakes could affect your score. According to FICO, those with higher credit scores before bankruptcy typically lose more points after a bankruptcy, while those with lower credit scores lose fewer points. Despite the difference in the number of points that the score drops, both people with high and low credit scores will have credit scores that end up in the same vicinity.

How Long Bankruptcies Stay on Your Credit Report

Much of the impact bankruptcy has on your credit score is determined by how long it will be on your credit report. The length of time in which the bankruptcy will be on your credit report varies depending on the type of bankruptcy you file. For example, a Chapter 13 bankruptcy will appear on your credit report for up to seven years and your discharged debts will also stay on your report for up to seven years after they are discharged. In a Chapter 7 bankruptcy, the bankruptcy will appear on your report for up to 10 years, though the discharged debts will drop off the report after about seven years.

Worried About Your Credit Score? Contact a New Braunfels, TX Bankruptcy Attorney

For most people bankruptcy is (and should be) a last resort. If you have tried other debt and credit counseling options and nothing has changed, then you may need to talk to a skilled Boerne bankruptcy lawyer. At the Law Offices of Chance M. McGhee, we have extensive knowledge of U.S. bankruptcy law and we also have more than 20 years of experience with helping clients get a clean slate. We can walk you through the bankruptcy process from start to finish and we can help you set yourself up for success after your bankruptcy is completed. Contact our office today by calling 210-342-3400 to schedule a free consultation.



How Bad is Bankruptcy for Your Credit Score?

July 30th, 2018 at 3:51 pm

Texas bankruptcy attorney, Texas bankruptcy lawyer, One of the first questions most people ask when considering the bankruptcy option is, “How badly will this impact my credit score?” For many, this fear becomes large enough that it prevents any action, whatsoever. In fact, when surveying any portion of the population, most people agree that the lasting impact on their credit rating is to blame. It is true that filing for bankruptcy will remain on your credit report for up to ten years; however, there are many factors to consider before determining whether bankruptcy is or is not the right solution for you.

The Impact Does Not Last for Ten Years

If you file for Chapter 13, bankruptcy will only remain on your credit score for seven years; Chapter 7 is ten years. However, with each year that passes, the impact bankruptcy has on your credit report diminishes. Recent activity influences your score far more significantly than a negative history. After filing, keep up with your budgetary plan, and you will successfully rebuild your credit quickly.

You Can Still Buy a Home or a Car

Within two years of time, you may be able to apply for an FHA loan for a mortgage payment, which is a guaranteed loan from the government and often has an interest rate lower than its conventional counterpart. Additionally, if you need to purchase a vehicle, many loans may be available to you, albeit at a higher interest rating. After filing for bankruptcy, your credit rating will drop between 150 and 250 points, which may put you in a poor credit bracket. Automobile loans for this credit ranking come with a high interest rate, which inevitably makes the applicant pay thousands more than someone with a higher credit score. A better option is to buy a relatively inexpensive automobile outright with cash for a few years until your credit score improves. If this is not an option, choose an auto loan between $4,000 and $6,000, so your monthly payment is low, despite the higher interest rate.

Your Credit Score Is Already Suffering

By the time most people consider the option of bankruptcy, they have already experienced missed payments, charge-offs, liens, foreclosures, and any number of other financial missteps. Each of these negatively impacts a credit score. Filing for bankruptcy is just another negative mark from which everyone eventually recovers. It is not life-ending, as many would have you believe. Instead, filing for bankruptcy potentially gives you a better opportunity for the future. If you were able to start fresh, you could put money into retirement or savings as you have always wanted, but maybe have never been able to accomplish.

Have Your Questions Answered

Perhaps you are just beginning to consider bankruptcy. Doing research is an essential first step. A Schertz bankruptcy attorney will help answer any questions you may have. Law Offices of Chance M. McGhee has helped clients just like you overcome financial difficulties for the last two decades. We offer cost-efficient, considerate, and compassionate counsel to all of our clients in San Antonio and throughout central Texas. Call us today at 210-342-3400 to schedule your free initial consultation to find out how we can help you.




A Brief Guide to Managing Credit Card Debt

January 16th, 2015 at 11:26 am

managing credit card debt, San Antonio bankruptcy lawyerAlthough most Americans have some form of debt, many could have avoided financial hardship by responsibly managing credit cards. Having funds instantly available is a great convenience, but overspending can put a person in a world of trouble.

Minimizing expenses is the first step for getting debt under control. Then, develop a budget that incorporates personal income, assets, and expenses. This can be a difficult task, which is why you should consider consulting a financial advisor or an attorney. If the debt amount is too great to pay off in a reasonable time period, consider discussing the situation with a bankruptcy lawyer.

Reasons and Alternatives to Canceling Credit Cards

According to one source, the most common reason for a person to close a credit card account is to achieve greater financial control. However, closing an account can actually harm your credit score.

There are a number of effective alternatives to closing a credit card account; one of the most common is to contact the creditor to renegotiate a new interest rate. If possible, it is best to keep an account open as its age will factor heavily into one’s credit score.

How to Cancel a Credit Card the Right Way

If canceling a credit card seems to be the only viable solution, be sure to do it in a way that minimizes the impact on your credit score. The most important fact to keep in mind is that canceling a credit card does not make the debt go away; the amount will simply transfer to a collections agency.

In order to avoid collections, cancel the card after paying the balance in full. Also, consider opening a low-interest credit card soon after the cancellation. This may prevent your credit score from lowering.

If you are dealing with crushing amounts of debt from credit cards, loans, or medical bills, bankruptcy could be the answer. To speak with an experienced San Antonio bankruptcy attorney, contact the Law Offices of Chance M. McGhee at 210-342-3400 to schedule a free consultation.

What Does Bankruptcy Really Do to Your Credit Score?

December 9th, 2014 at 9:30 am

bankruptcy credit score, San Antonio bankruptcy lawyerMany Americans have a limited understanding of bankruptcy and credit in general. For this reason, financial crises can seem overwhelming and hopeless.

One topic that concerns many debtors who are considering bankruptcy is how the process will affect their credit scores. While bankruptcy will most likely have some impact on a credit score, debtors should not view this option as a financial death sentence.

One of the truest statements about bankruptcy is that it is different for everyone. Sometimes, it is the most appropriate way out of debt; other times, there may more effective alternatives. A helpful way to get a firm understanding of one’s financial situation is to sit down with a legal expert who can offer a firm understanding of the law surrounding debt relief options.

Yes, Bankruptcy Will Harm Your Credit Score

There is no way around the truth. Depending on the type of bankruptcy a debtor files, a credit score will likely drop as much as 220 points, according to Money Crashers. The bankruptcy also remains on a credit report for as long as a decade. This might dissuade some from considering bankruptcy as an option.

Bankruptcy can be a double-edged sword—a last resort for many Americans. While it is true that bankruptcy will have a lasting mark on a credit report, it should prompt one of two responses: either an acknowledgment that one’s financial situation is dire enough that the credit score dip is insignificant when looking at the bigger picture, or a realization that the negative mark is not worth the risk and that other options could be viable.

Bankruptcy, however, does not take one’s credit score out of the picture. After people go through bankruptcy, whether it is Chapter 7 or Chapter 13, their eyes should be set on bringing their score up immediately. While the relief in debt might offer some room to breathe, it is better to view it as a chance to hit the reset button with the intention to build it up again.

If you are struggling financially and thinking bankruptcy might be the answer for you, it can be beneficial to sit down with a Texas bankruptcy lawyer to discuss your options. At the Law Offices of Chance M. McGhee, our passion is working with clients to find effective solutions for their debt problems. Call us today at 210-342-3400 for a free consultation.

Three Proven Methods to Improve Your Credit Score

November 13th, 2014 at 8:59 am

improve credit score, San Antonio bankruptcy lawyerTo say that a person’s credit score is important is an understatement. Your score not only affects your ability to take out loans and successfully apply for credit cards, but it also plays a role in applying for insurance, leasing a car, and even getting an apartment. More than just three numbers, a credit score is a measurable value of how trustworthy a person is with money and payments.

For these reasons, you should make every attempt to raise your credit scores as high as possible. Here are some helpful ways to boost and maintain a respectable credit score:

1. Start with What You Have

As mentioned before, it helps to think of a credit score as an indicator of financial responsibility. That said, the road to a better credit score begins by analyzing one’s own financial situation. While this may require sitting down with a professional, here are some basic strategies to get started:

  • Focus on paying off credit cards by making monthly payments;
  • Strive to keep balances low on credit cards;
  • Make attempts to pay off debt instead of moving it around; and
  • Keep card accounts open.

These are some basic options available to anyone with one or more credit card accounts. These steps may not be easy, but accomplishing them can go a long way toward improving one’s credit score.

2. Open New Credit Card Accounts

If you have no credit at all, it is imperative to start building it. A smart first step is applying for a credit card. For those who already have lines of credit and are looking to boost their score, it may be worthwhile to open a new account.

It is important to remember that it is quite easy to get over your head when it comes to credit cards. Responsible use of a new account, however, can lead to a significant credit score boost.

3. Do Not Spread Small Charges across Different Cards

Making small purchases, usually under $100, across different credit cards can ultimately harm your credit score. It is best to rely on as few cards as possible. Having small amounts of debt across various cards, often referred to as “nuisance charges,” is not only bad for your credit, but it also can quickly build up to create a difficult situation.

If you are looking for a San Antonio, Texas bankruptcy attorney or are curious about how bankruptcy might work for your financial situation, contact the Law Offices of Chance M. McGhee. Call 210-342-3400 to schedule a free initial consultation.

How Does Filing for Bankruptcy Affect My Credit Score?

February 14th, 2014 at 4:47 pm

bankruptcy IMAGEEvery person who opens up a credit card, gets a loan, or finances a car has a credit report. Over years of making payments and opening new lines of credit, the credit report will reflect your ability to pay bills on time and effectively manage your debts. Lenders will review your report while deciding if you are a good or bad credit risk. Events like filing for bankruptcy are also reported to credit reporting agencies and can negatively impact your score.

The type of bankruptcy which is filed has different effects on your report. A Chapter 7 bankruptcy can eliminate the majority of your debts such as credit cards, medical debts, and even secured debts. Since it does not require the debtor to repay debts, it will remain on your credit report for ten years. A Chapter 13 bankruptcy is a reorganization which requires repayment of part of the debts. This kind of bankruptcy stays on your credit report for seven to ten years, depending on the credit reporting agency.

A bankruptcy will also lower your overall credit score. A higher credit score will be decreased by more points than a lower credit score. Credit agency FICO created two examples of how this works. If you have a credit score of 780, filing for bankruptcy can take between 220 to 240 points off your score. Whereas, if your credit score is 660 and you file, the decrease is only 130 to 150 points. The rationale is that those with a lower score are already risks, so a bankruptcy is not as detrimental.

Being afraid of filing for bankruptcy can mean years of struggling with debts. If that means that you are missing payments, opening up new accounts, or using too much of your credit, then your credit report will decrease due to this risky behavior. Filing for bankruptcy gives you a financial restart necessary to start rebuilding your credit. Contact an experienced bankruptcy attorney in San Antonio today to discuss what filing for bankruptcy can do for you.

Proposed Changes to Credit Score Reporting

October 23rd, 2013 at 3:21 pm

credit scores

A person’s credit score represents the riskiness of lending that person money.  Banks, credit card companies and car dealerships all use this information when approving or denying a credit application.  The score is weighted on a scale up to 850 based on payment history, length of credit history, accounts owed, types of credit used and whether new accounts have been opened.

Consumers who handle their credit accounts well and make payments on time have a higher score.  Those who miss payments, open too many accounts, or who don’t use credit or loans will have a lower credit score.  Filing for bankruptcy will also lower your credit score because you do not have to pay back your debts.

Now a new bill looks to expand on what is reported on credit scores.  The bill is called the “Credit Access and Inclusion Act” and was introduced during the summer of 2013.  The goal of this bill is to allow people who haven’t built up a credit to get credit for paying rent, utility and cable bills.  A recent survey of over 1,000 renters showed that around 70 percent would want their non-loan payments to be reflected in their credit scores.

Advocates of the bill say that it will help people who are trying to build a credit score get more affordable credit rates.  It also allows those without any credit history a chance to build their credit score.  Congressman Keith Ellison, a democrat representing Minnesota and co-author of the bill, stated that  “our current credit reporting system leaves more than 50 million people without a credit score…Including more data in credit reports will make it easier to get and improve a credit score.”

Those who detract from the bill say that people are better off when credit bureaus know less about them.  Making the credit score include other accounts makes it more likely that mistakes will be penalized.  But if this law passes, it will make it a lot easier to recover from filing for bankruptcy.  If you are considering filing for bankruptcy, then contact an experienced bankruptcy attorney in San Antonio today.

All about Your Credit Score

June 20th, 2013 at 10:18 am

Your credit score is a three digit number that is used by businesses to determine if you are worthy of risk. Do not take this these three little numbers lightly. Although small, they have a lot a power and can affect your life negatively or positively. If you don’t think so, consider this; When you apply for credit, it is those three numbers that will determine if you get approved or denied. The same holds true when you apply for an apartment, insurance and a job.

Theresa    San Antonio bankruptcy attorneyYour credit score is determined by a mathematical formula and although there are tons of these formula models around, most companies use the FICO scoring model, which gauge between 300-850. The higher your score is the better risk you are–likewise the lower the score the higher the risk. Until 2009, each person had three FICO scores because there were three major credit reporting agencies using the FICO model, EquiFax, TransUnion and Experian. Experian is no longer under agreement with FICO. Although there are five categories that make up a credit score, each person’s score is determined based on their circumstances individually. That means that a new person with no credit history is not weighted the same as someone with an established credit history. Instead, the newbie is grouped and weighed against those in that same circumstance—tens of millions to be exact.

There are five categories used to make up a credit score. Payment history and debt owed are two categories that weighed most heavily.

  • How you make your payments and any delinquent accounts goes into the Payment history category and is 35% of the pie.
  • Outstanding Balances (30%)—how much you owe is a factor that is considered. For instance, if you have several open accounts with a large outstanding balance spread between them this might be viewed as a higher risk.
  • How long have you had credit (15%)—how long have you had your open lines of credit and their activity.
  • Types of Accounts (10%)—revolving and installments
  • New lines of Credit (10%)—how many new lines of credit and/or attempts to get new lines of credit is also weighed. This includes hits to your credit report from utility companies.

By law, each person is entitled to a free credit report once a year from each reporting agency. If you have questions about how bankruptcy can affect your credit or how to get your credit back on track, call your San Antonio bankruptcy attorney today.


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