If you are considering filing for bankruptcy, you might be concerned about the effect it will have on your credit score. Will bankruptcy boost it or see it get worse?
The answer lies somewhere in between.
You need to accept it will suffer at first
Filing for bankruptcy will have an immediate worsening effect on your credit rating. However low it is before you file, you should expect it to plummet further. In addition, you should know that the bankruptcy will stay on your credit report for some years. Chapter 7 stays on your report for 10 years and Chapter 13 for seven years. These two things might put you off filing, but they shouldn’t.
You can slowly start to improve your score
Once the court approves your bankruptcy, you can start rebuilding your credit score. You won’t see a quick turnaround, but, with the right attitude, you have the chance to rebuild it far higher than it was when you were considering filing.
To rebuild it, you will need to rebuild lenders’ trust in you. Ways you can do it include taking out a secured credit card that some lenders make available to people who have just filed. You will need to put money up front for this but it may well be the only kind of credit card you can get for the moment.
Another alternative is to have someone make you an authorized user on their card, where you can reap the benefit of their credit history. Credit builder loans are another option – these are “loans” that you cannot touch until you have made all the payments for them (unlike a traditional loan where you get access to the cash before making the payments).
However, the reality is that if you are considering bankruptcy, your credit score is already in tatters. And, unless you suddenly find the money to pay all your debts, it will only get worse. While it can be a tough decision to file for bankruptcy, many people find that it is the best option for them and their credit score in the long run. Each person’s situation is unique, so be sure to learn more about all the options available to you.