Did you know that someone with an average credit score will see it plummet between 130 and 150 points when they file for bankruptcy? This immediate financial blow is painful, but it’s important to know that the financial impacts of filing for bankruptcy ARE temporary.
If you’re considering filing, then you need to know the negative impacts it will have on your credit report. It’s equally important that you understand the steps you can take to improve your credit score and credit report even after filing for bankruptcy.
Read on to learn everything you need to know about how filing for bankruptcy will impact your credit report.
Bankruptcy and Your Credit Score: What You Need to Know
Are you considering filing for bankruptcy? If so, then you’re likely already struggling to pay off your debts. You may be behind on a few different bills, which will reflect on your credit score. Your credit score is probably already suffering due to your overstretched credit limit and delinquent bills.
Sound familiar? If you’re in this type of situation, then you may be concerned that filing for bankruptcy will be the hypothetical final nail in the coffin. It’s important to realize that a bankruptcy claim will not completely destroy your credit. While you can expect an immediate drop, you’ll see your score rising over time once you get control over your finances.
If you succeed with a bankruptcy claim and work diligently on improving your credit score, then you can bounce back within three to five years. Even though the bankruptcy will still show up on your credit report, you’ll still see your score rising.
How Long Will Bankruptcy Stay on My Credit Report?Bankruptcy will remain on your credit report for ten years. During this time, it can have negative impacts on your ability to take out loans, get credit cards, and obtain favorable interest rates. Despite that, the bankruptcy WILL drop off your report in ten years. Until that happens, there are several steps you can take to improve your credit score. Learn more about that below.
What Happens When Bankruptcy Drops Off Your Report?
You might think that once the bankruptcy drops off your report that you’ll be in the clear. It’s important to be prepared for what will happen – your score will likely drop a bit at first. Why?
While bankruptcy is on your credit report, your score is often grouped with other individuals in bankruptcy. Once bankruptcy drops off your report, you’ll be re-classified with everyone else, including many who have never filed for bankruptcy.
If you’ve taken the time to increase your score while you were in bankruptcy, then you should still be in a good position even if your credit takes a minor hit. Keep up with the goals you set forth before, and your score will even out in no time.
Credit-Building Tips for Those Who Have Filed for Bankruptcy
After you file, your score will take an immediate hit. It feels discouraging, but have faith that you can improve your credit score with time and consistency. Here’s what you need to do:
· Create a budget for your household right away
· Prioritize your bills and pay them on time
· If you can’t pay a bill on time, then negotiate with your lender to avoid a delinquency mark on your credit report
· Apply for a low-limit credit card
· Keep your debt to credit ratio at 30% or lower
· Start monitoring your credit score (check it at least once a month)
· Consider making a big purchase if you can handle the payments
These small, simple steps will have a huge impact if you can stay consistent. After about five to ten years, your credit can be as good as new. It will be as if you never had to file for bankruptcy!
Let Our Bankruptcy Experts Help You Find Financial Freedom
Do you understand the consequences of filing for bankruptcy? Are you prepared to get started on a bankruptcy claim to regain your financial freedom?
Are You Considering Filing For Bankruptcy?
If you feel bankruptcy is the best option for your financial situation you need to speak with an experienced bankruptcy lawyer as soon as possible. Please contact us online or call our office directly at 888.348.2616 to schedule your free consultation.