How Does Bankruptcy Affect Your Credit Score?
When individuals have overwhelming debts, are facing mounting bills, experiencing non-stop phone calls and text messages, filing for bankruptcy might be an option for a way out. But, if you are thinking about filing for bankruptcy, then it is important for you to know how it affects your credit score?
Some might say that bankruptcy has a negative effect on your credit score, and at the same time, some might say that it helps to improve your credit score. You might be wondering what is the truth.
Well, the truth is that if you have huge and unmanageable debt load, and you’re suffering from delinquencies, collection efforts, lawsuits, foreclosures or car repossessions, then your credit score will surely reflect all these negative items already. In such cases, filing for bankruptcy helps you to enhance your credit score, and rehabilitate it quicker than almost anything you can do. Therefore, in the long run you will obtain a fresh start, free from your debts, and have a better credit score compared to just letting things remain in a state of chaos.
Get the Right Assistance and Our Free “720 Credit Rebuild” Program!!!
We are one of the few bankruptcy law firms on Maui that not only help you receive a discharge of your debts, but assist you to rebuild your credit after your case is over. By enrolling you into our “720 Credit Rebuild Program” you will receive expert guidance in how to take small steps on a weekly basis which will restore your credit back up to a 720 score or higher within about a year or two.
We have a team of highly experienced bankruptcy lawyers who can help you to qualify and file for bankruptcy, and also provide you with debt settlement as well as tax resolution options. Our attorneys can provide you with the right advice and guidance and when it’s done, we can indeed raise your credit score within a short period of time.
What is a Credit Score?
Well, it is a number that describes your credit history and foresees the possibility that you will default on the repayment of a debt. Credit scores are used by lenders to make a decision about whether you should be given a loan and if so, then at what interest rate.
One of the most common types of credit scores is the FICO score, ranging from 300 to 850. A FICO score relies on your credit report information, which includes:
- History of your debt repayments
- Debt amount you presently have, which includes your debt-to-credit balance ratio
- The different types of debts you have
- How long you have had credit
- Whether you’ve recently applied for new credit
Generally, a high FICO score means that you’ve been good at managing your financial situation. On the other hand, a low FICO score means that you’re experiencing trouble with credit repayments.
How Can Bankruptcy Help You to Improve Your Credit Score?
Once you have accomplished bankruptcy relief, you may realize that the bankruptcy helped in raising your credit score although the bankruptcy will stay on your credit report for a maximum ten years in the case of filing a Chapter 7 bankruptcy and seven years for the filing of a Chapter 13. Let’s discover how it can help you…
- Relief from delinquent reports
Does your credit report include high credit balances and late payments? If so, then understand that the bankruptcy discharge can act as a benefit to you. The bankruptcy got rid of all those debts, and therefore they are no longer marked as delinquent.
- Enhance your debt-to-credit balance ratio
The amounts you owe on your accounts comprises approximately 30% of your credit score. A crucial factor is the percentage of the available credit that you are using. And bankruptcy might aid in improving your debt-to-credit ratio, because the ratio is actually a comparison of your positive debts, such as your non-delinquent car and house payments, to your credit balance available. Thus, without so much debt your unused available credit presents an improved ratio, and the higher your FICO score gets.
We Can Help You!!!
We completely understand your situation, and that’s why we offer chapter 7 and chapter 13 bankruptcy, as well as debt settlement and tax resolution services. There is no doubt that exploring and obtaining a debt relief option can be quite a frightening process, but help us help you by giving you a fresh start financially and allowing you to experience an improved credit future.