One of the fears that folks have about filing for bankruptcy is the impact that it will have on their credit score. While this is a valid concern, if you are considering bankruptcy, then your credit score could likely use work anyway. In addition, your credit can be rebuilt after bankruptcy, and you can find yourself in good standing with credit reporting bureaus. In this article, the Danville, Indiana bankruptcy lawyer, Chris Arrington, will discuss the impact that bankruptcy could have on your credit score.
How bankruptcy impacts credit scores
Building credit is a huge part of our financial lives. Credit allows us to get loans and make large purchases we wouldn’t otherwise be able to afford. However, if you’re struggling with making payments on your current debts, maintaining your credit score should not be your top priority. Getting rid of your debt may be much more important to your financial livelihood. Getting rid of that debt is a great way to actually help improve your credit score.
Bankruptcy is a useful tool for those who are drowning in debt. Nonetheless, it will have a significant impact on your credit score. The impact of bankruptcy on your credit score is related to two factors. The first factor is your credit score now. The second factor is the amount of debt you’re going to discharge. Those with higher credit scores can expect to experience huge drops.
If your credit score has dropped into the 500 range, you don’t have too much to worry about when it comes to protecting your credit score. Filing for bankruptcy might be the right move and is unlikely to have the major impact you think it will.
Payment history as a factor in determining your credit score
Your payment history is the most significant factor when it comes to determining your FICO Score. Bankruptcy is one of the most damaging things that can happen to your credit. Those with credit scores in the 700s can expect their score to drop by about 200 points. Those with weaker credit scores will not see as much damage.
The actual impact of the bankruptcy will depend heavily on the makeup of your credit profile when you file. Those who have already missed several payments, have accounts in collection, had a vehicle repossessed, or faced foreclosure on their home won’t see a significant drop in their credit score.
Rebuilding credit after bankruptcy
There are several ways to rebuild your credit once you have filed for bankruptcy. How long it will take will depend on the individual circumstances of your case. To determine how a Chapter 7 or Chapter 13 bankruptcy will impact your credit score, you should discuss the matter with an experienced bankruptcy attorney.
Talk to a Danville, IN Bankruptcy Attorney Today
Chris Arrington represents the interests of individuals who are deep in debt and struggling to find a way out. Call our office today to schedule a consultation, and we can begin discussing your next steps right away.