How Will Bankruptcy Affect my Credit?
One of the biggest concerns people have when considering filing for bankruptcy is how it will affect their credit. They worry bankruptcy will reflect poorly on their credit history, and that they won’t be able to get loans after bankruptcy. However, not all creditors view bankruptcy in the same way. There are some creditors that offer loans to individuals post-bankruptcy. Although these loans may have lower limits and above average interest rates, they provide a good opportunity for individuals to begin rebuilding their credit.
Most people are surprised to find out that the damage done to their credit score after bankruptcy isn’t as bad as they expected. In fact, continuing to default on payments will do more damage and reflect poorly on your ability to maintain financial health. Typically, those experiencing overwhelming debt already have an extensive negative credit history.
Eliminate your Debt
Bankruptcy provides a way to reduce or eliminate your debt, and removes your negative credit standing. When you file for bankruptcy, your credit report is cleaned of high balances and delinquent accounts. Over time, bankruptcy can help by allowing a fresh opportunity to rebuild credit. After bankruptcy, your credit score is determined against how your score compares to other bankruptcy filers, which is a much fairer comparison. Most people find their score improved after filing due to the score being calculated with taking into account the recent elimination of debts.
Following bankruptcy the best step to rebuilding your financially stable future is to evaluate your income, expenses and previous spending habits. Often times, people overlook the importance of making adjustments to their financial lifestyle and fail to stick to a budget. Tracking your spending and the due dates for bills will help with financial stability. Apply for a manageable line of credit to being the process of reestablishing your credit history. The fastest way to improve your credit standing is to keep a low balance on the card and make consistent payments. Consistency in your payment history will show creditors you are reliable, and improves your chances of receiving credit in the future.