Filing for bankruptcy can be a difficult decision to make, but sometimes it is necessary to get back on the road to financial recovery. However, if you are considering bankruptcy, you may be wondering what would happen to your credit score. The information on your credit report can play a significant role in important transactions in the future, such as buying a house or a new car, or even applying for a job or renting an apartment. As you consider your options, it is important to understand how bankruptcy will affect your credit score and how you can rebuild your credit after receiving relief from your debts.
The Truth About Bankruptcy and Credit Scores
When you file for bankruptcy, this fact will be listed on your credit report and remain there for several years. A Chapter 13 bankruptcy will stay on your credit report for seven years, while a Chapter 7 bankruptcy will continue to affect your credit score for 10 years. It is likely that bankruptcy will significantly lower your credit score, and creditors will see that you have filed for bankruptcy when reviewing your credit report and making decisions about whether or not to lend you money.
However, if you are considering bankruptcy, it is likely that a number of factors have already lowered your credit score and will continue to affect your credit in the future. If you have missed payments toward credit cards, utility bills, or a mortgage or auto loan, this will also lower your score, and these facts will remain on your credit report for around seven and a half years. A repossession or a bill that is sent to collections will stay on your credit report for seven years. If you are experiencing financial difficulties without a chance of relief, your credit score will continue to be reduced. It is likely that by filing for bankruptcy and taking the hit to your credit, you can get out from under your debts and eliminate these ongoing payment requirements, which will allow you to rebuild your credit and increase your credit score much more quickly.
Rebuilding Your Credit After Bankruptcy
After you complete the bankruptcy process, increasing your credit score will take time. Fortunately, with patience and persistence, it is possible to restore good standing with creditors again. There are a number of steps you can take to improve your credit score, but ultimately, being responsible with money, using credit wisely, and making sure you are prepared for the unexpected will be the best things you can do.
Some specific tips to follow when rebuilding your credit include:
Get new credit accounts – Even though lenders may be hesitant to grant you new credit after you have filed for bankruptcy, you may be able to establish credit by using secured credit cards or having another person co-sign a loan. Using these accounts wisely, such as by making small purchases and paying off balances right away, can help your credit score increase.
Pay bills on time – Making timely payments with all of your creditors, as well as utility companies or other expenses, is one of the best ways to increase your score over time. If you have extra money because you no longer need to make payments toward debts that were discharged through bankruptcy, you could put it toward paying off other debts more quickly, such as student loans, which can also help improve your credit.
Verify the accuracy of your credit report – Regularly checking your credit report can help you address any issues that may affect your credit score. You may be able to identify debts that you are no longer required to pay or other inaccuracies. Monitoring and responding correctly to these issues can help you make sure you will be able to continue to improve your credit in the years to come.
Contact Our Hudson Valley Bankruptcy Attorney
While bankruptcy can feel like a daunting situation, its effects do not have to be permanent. With careful planning and consistent action taken towards rebuilding your financial standing over time, you can achieve a good credit score again, which will provide you with more opportunities in the future. If you have questions about the bankruptcy process and the options for debt relief, contact the Rockland County bankruptcy lawyer at 845-358-7100. Call 845-358-7100 to set up a free consultation today and get started on the process of regaining control over your financial future.