Frequently Asked Questions About Bankruptcy and Credit Scores

 Posted on March 22, 2022 in Bankruptcy

The bankruptcy process can be confusing. Those who are struggling with debt will often be unsure about their options, the steps they will need to take to receive relief, and the short-term and long-term effects of a bankruptcy filing. Credit scores are one issue that can be especially difficult to understand, and in many cases, debtors will be worried that filing for bankruptcy will affect their ability to obtain loans or buy a house in the future. Our firm works to provide people with answers to the questions they have about these issues.

How Much Will Bankruptcy Lower My Credit Score?

The effects of bankruptcy on your credit score will usually depend on your score prior to filing. If you had a good credit score that was higher than 700 points, bankruptcy will likely result in a significant decrease of 100 points or more. If you had a lower credit score in the 500s or 600s, bankruptcy will likely cause your score to drop, although the decrease may not be as significant. However, if you are concerned about your credit score, it is likely that it has already been affected by the issues that are causing you to consider bankruptcy, such as missed payments on loans or credit cards. By filing for bankruptcy, you can regain financial stability, allowing you to begin rebuilding your credit score.

How Long Will a Bankruptcy Appear on My Credit Report?

Your credit report includes a variety of information about the loans you have taken out, the payments you have made, and how you have used credit in the past. A bankruptcy filing will appear on your credit report, and it may be considered by creditors when they decide whether to approve you for loans or credit cards in the future. Since a Chapter 7 bankruptcy usually indicates that a person is a higher credit risk, it will remain on your credit report for 10 years. A Chapter 13 bankruptcy and other bankruptcy references, such as actions taken against you by collection agencies, will stay on your credit report for seven years.

Will a Low Credit Score Due to Bankruptcy Prevent Me From Obtaining Loans?

While a lower credit score and a bankruptcy on your credit report will be considered by creditors, this will not necessarily mean that you will not be able to obtain loans or other forms of credit. Many lenders provide post-bankruptcy loans that are secured by collateral, and secured credit cards may also be available. If you can increase your credit score in the years following a bankruptcy filing, more loan options will be available.

How Can I Increase My Credit Score After Bankruptcy?

There are a variety of ways you can rebuild your credit, and maintaining good financial habits is often the foundation of these strategies. Making sure you pay bills on time and use credit wisely will help your credit score increase. You may also be able to obtain certain types of loans that are meant to help build credit. By making ongoing, affordable payments while also saving money and ensuring that you can cover your ongoing expenses, you can demonstrate financial responsibility to potential creditors. While it can take time and a great deal of patience, following these practices will result in a higher credit score, allowing you to pursue more opportunities in the future.

Contact Our New Braunfels Bankruptcy Attorney With Your Questions

If you have any other questions about bankruptcy, credit scores, and debt relief, the Law Offices of Chance M. McGhee is here to help. We will make sure you understand your options, and we will help you take the right steps to address your debts and protect your financial future. Contact our Kerrville bankruptcy lawyer today at 210-342-3400 for a free consultation.

Sources:

https://www.marketwatch.com/story/7-common-myths-about-how-bankruptcy-affects-credit-2018-03-16

https://www.experian.com/blogs/ask-experian/how-does-filing-bankruptcy-affect-your-credit/

https://www.thebalance.com/how-much-will-bankruptcy-hurt-your-credit-score-960061