How Bankruptcy May Affect Your Credit Score
If you are considering bankruptcy, you likely have a great deal of debt and are not thinking about making an additional large purchase such as a home or vehicle. However, it is important to understand how bankruptcy can affect your future credit score, which will impact whether or not you can purchase a home, obtain a line of credit or even secure employment in the future. Understanding how bankruptcy can affect a credit score, and for how long, can help you determine how best to approach your finances afterwards.
Bankruptcy and Your Credit Report
Your credit report is the financial report that contains not only your credit score, but the details of many financial transactions, credit history, and bankruptcies. Depending on your financial health this score can fluctuate either up or down. If you have had a history of delinquent payments or a bankruptcy, your credit score will likely go down, but remember that it can always rise.
A Chapter 7 bankruptcy will stay on your credit report for ten years from the date of filing, while a Chapter 13 bankruptcy will stay on your credit report for seven years from the date of filing. However, you do not have to wait the full seven or ten years to begin to repair your credit.
Rebuilding Your Credit Score After Your Bankruptcy
Bankruptcies will negatively affect your credit score. However, there are a few ways to minimize the impact of bankruptcy as you wait for your credit to heal and your credit score to be restored.
- Check Your Credit Score. Obtain your credit report from all three credit reporting agencies after you declare bankruptcy. Make sure that everything is reported corrected, and that your debts are either discharged or listed as being included in the bankruptcy. If you find any errors, contact the credit reporting agency immediately to fix them. Continue to monitor your credit reports periodically to ensure that your report is accurate and does not include any fraudulent activity.
- Obtain a Secured Credit Card. Having a secured credit card allows you to pay a certain amount in advance, and then use the card for purchases. This tool can help you build your credit after a bankruptcy.
- Pay All Debts on Time. Make sure to pay all of your debts and monthly bills in a timely manner, and never let any additional creditor accounts become overdue or go to collections, which can negatively impact your credit score.
- Add a Loan. While you will not be able to obtain a loan immediately, one or two years after your bankruptcy, consider getting an automotive loan or small line of credit and repay it monthly in a timely manner to build your credit score.
Let Us Help You Today
Filing for bankruptcy can relieve your financial debts, but also create challenges with your credit score, and your ability to obtain credit for several years. Your credit will repair itself over the next few years if you take careful care and pay attention to your financial transactions. Consider visiting with your experienced West Palm Beach bankruptcy attorneys at Kelley Kaplan & Eller at 561-264-6850 for a consultation regarding what type of bankruptcy you should file, and how you can ensure that your credit score is impacted as minimally as possible.