Posted on: 21 November 2014
Your credit score can be impacted by bankruptcy more seriously than any other single monetary event. While it's not always the case that all bankruptcies will result in a large credit rating drop—in fact, it's possible your credit rating to increase after a bankruptcy—any negative effect causes it harder to get credit in the foreseeable future. A bankruptcy also appears in your credit report for a long time when you file, supplying a large warning signal to possible lenders of a payment history that is blemished. Some lenders promptly refuse any application when there is a bankruptcy recorded on a credit history.
Impact on Your Credit Score
A bankruptcy filing could cause a significant drop in your credit rating if you have an inconsistent payment history and then file for bankruptcy. Another factor is your total debt, which you owe, which a bankruptcy discharge would help. Nevertheless, it's uncommon that the bankruptcy will not hurt your credit rating.
Impact on Loan Interest Rates
Your FICO credit rating is usually the most critical determinant in whether you receive credit and at a favorable interest rate. The better your credit history implies you can borrow at a lesser rate of interest. Filing bankruptcy could cause your credit score to fall drastically. If your creditor is prepared to take your credit application, it will probably be on less favorable conditions.
Impact on Your Credit Report
The kind of bankruptcy you decide to file will determine how long it will be recorded in your consumer credit report. Chapter 11 and Chapter 7 bankruptcies remain on your credit history for 10 years when you file. Chapter 13 proceedings can take as much as three to five years to conclude. Chapter 13 bankruptcies stay on your credit file for seven years after the bankruptcy filing.
Sometimes, Bankruptcy is Not Always a Factor
Most of the time, it's not your damaged credit score which makes it difficult to get credit. Some lenders don't give credit to anybody no matter what their FICO score is or whether or not they filed bankruptcy. In the event you are experiencing trouble getting credit following a bankruptcy, consider opening a secured credit card.
You can rebuild credit after filing bankruptcy the exact same manner which you develop credit. Now that you know how bankruptcy may affect your future credit score, interest rates, and credit report, you will be able to make an informed decision. You should plan to speak with your bankruptcy lawyer and financial planner for additional guidance.Share