Does Filing For Bankruptcy Affect Your Credit?
Filing for bankruptcy comes with many advantages and disadvantages. The prime benefit of a bankruptcy petition is that all your creditors would stop hounding you to repay your debts. However, it can hugely affect your credit and the power to secure loans for a long time.
What Happens To Your Credit When You File for Bankruptcy?
When you file for bankruptcy, you declare your inability to settle your debts. This declaration will reflect on your credit score. The credit score is a mark of a person’s creditworthiness. The higher the credit score, the better you look to prospective lenders. If the court discharges the bankruptcy filed, it means you no longer owe the debts mentioned at the time of filing. However, getting a loan often proves to be difficult because many lenders look at your credit rating and history before lending money.
The bankruptcy case can bring with it a lot of legal matters, which can prove to be highly overwhelming to any individual or company. If you find yourself in this situation, hiring a bankruptcy lawyer for professional assistance would be best.
How Does Bankruptcy Affect Your Credit Score?
Filing for bankruptcy will be indicated on your credit score for about 7-10 years. Every individual or lender organization would know that you filed for bankruptcy by looking at your credit score during this period. This practice helps them in evading bad loans.
It would continue to reflect on your credit score until the three main credit bureaus, namely Equifax, Experian, and TransUnion, remove the bankruptcy from the report. Only after a discharge would you be able to recover your reputation as a dependable borrower, but this can take a long time unless you know the tricks to bounce back. Even so, you would still face many challenges after having your bankruptcy discharged, as you would have a tough time securing certain kinds of loans. On top of that, even if you do manage to get a loan, you’d be required to pay excessive interest rates and settle for unfavorable terms.
How to Rebuild Your Credit Score After Declaring Bankruptcy?
Post-bankruptcy, it is indeed hard to get loans, but it’s not impossible. There are a few ways to rebuild your credit and reputation as a responsible debtor. The first thing you need to do is contact a competent bankruptcy lawyer that can inform you of the court proceedings that would take place after filing the bankruptcy. Here are other things that you can do to build your credit score back up:
Pay your bills on time
Paying bills on time is the first step to recovering from bankruptcy. One of the ways to ensure that you never miss a payment is by giving standing instructions to your bank to make payments on your behalf.
Keep reviewing your credit report
Keep track of your credit report and ensure that there are no discrepancies in the entries. Contact the credit bureaus if you notice any inconsistencies or errors.
Stay within the credit limits
Repaying credit on time and staying within the credit limits will effectively contribute to rebuilding your credit score. Your prospective lenders would know that you have successfully been on top of all your debts.
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