The Truth about Bankruptcy and Your Credit
Are you one of the many who are trying to avoid bankruptcy like the plague to spare your credit score? Are you trudging through stifling debt just because you fear your credit will never be the same again?
Bankruptcy does have an immediate and negative effect on your credit. In a month or less, your credit report will include bankruptcy.
But don’t panic; there’s both good and bad news when it comes to your credit and filing for bankruptcy. Here are the details.
Bankruptcy will appear on your credit report for seven years.
Following the discharge of your debts, there will be an “R9” note on your credit report. This signals to your creditors that you’ve filed for bankruptcy. It can make creditors leery of lending to you.
Your credit score may actually increase following a bankruptcy.
While your credit score will drop immediately after your bankruptcy, some people find that six months later their scores surpass where they were before the bankruptcy.
When old debts, missed payments, and delinquent loans fall off your report after bankruptcy, your score should increase despite the “R9” designation. That may be just what you need to enjoy a fresh start.
You can begin rebuilding your credit score even when you’re bankrupt.
Lenders take more into account than the fact that you’ve declared bankruptcy. They look at your income, living situation, and work history. You can rebuild your credit. Slowly reestablish yourself by
- Building your savings
- Paying your bills on time
Then, attempt to get some credit, even if it’s a small amount or a credit rebuilder or secured credit card. With new credit in hand be sure to
- Make your credit payments on time
- Get a variety of credit accounts and manage them well
- Keep your debt manageable to avoid a high debt ratio
Give yourself at least a year to get reestablished.
You should be able to get at least a secured credit card after your discharge (release) from bankruptcy. You may not be able to qualify for larger items, like a mortgage, until two years after bankruptcy.
Bankruptcy will not ruin your financial future.
Many who initially rule out bankruptcy to save their credit rating end up declaring bankruptcy later on. If you wait, you might find yourself in a worsening position.
There is hope for restoring your credit after bankruptcy. Call (519) 310-3733 to get a free consultation with a professional from McLay before your debt overcomes you.