Bankruptcy can import your credit score more severely than any other single financial event. While not all bankruptcies indeed cause a big credit drop (in fact, it is possible your credit score could rise following a bankruptcy), any cold effect makes it more challenging to acquire credit in the future. A bankruptcy also appears on your credit publicize for years after you file, providing a big warning sign to potential lenders about a troubled payment history. Some creditors directly deny an application when a bankruptcy is listed on a credit report.
Key Takeaways
- while securing credit post-bankruptcy can be a defiance, it is by no means an impossibility.
- Depending on the reasons for and the situation regarding your bankruptcy, you might even see a slight credit swell.
- Bankruptcy can be an intelligent financial decision, but consult a bankruptcy professional before filing.
- Building a personal relationship with a lender can be one of the fastest ways to hypothecate credit after filing for bankruptcy.
Bankruptcy and Your Credit Rating
Your FICO credit score is habitually the most important determinant in whether you receive credit, how much and at what interest rate. The higher your reliability rating means that you can borrow more and at a lower interest rate. Filing bankruptcy can cause your acknowledgment score to drop dramatically. If a lender is willing to accept your credit application, it is likely to be on less favorable titles.
FICO states that your payment history makes up 35% of your total credit score. It is attainable that a bankruptcy filing will not cause a major drop if you already have an inconsistent payment history. Another 30% of your rationale is the total amount of debt that you owe, which bankruptcy discharge can actually help. However, it is rare that a bankruptcy does not price your credit rating.
Bankruptcy and Your Credit Report
The type of bankruptcy you choose to file will regulate how long it is listed on your
Applying for Credit After Bankruptcy
Since it can be difficult to get credit after filing bankruptcy, your close relationship with a lender can be crucial. Having employees or management at a bank, credit union, or auto lender that advised of, trust, and like you makes it easier to get an application accepted.
You rebuild credit after bankruptcy the same way that you physique credit before one: with time and consistent repayment history. If you believe you can continue to repay a pre-existing debt during and after bankruptcy, heed a reaffirmation agreement with one of your creditors to help the process of rebuilding your credit score.