Is bankruptcy the best choice for me? How will a bankruptcy affect my credit score?
It’s a myth that filing for bankruptcy destroys your credit rating. To the contrary, filing for bankruptcy can put you on the path to a better credit score.
How does filing for bankruptcy affect my credit score?
At Walker & Walker, we keep in contact with our clients after their bankruptcy filings. Over the years, our firm has seen firsthand what happens to many people’s credit scores after bankruptcy.
Immediately after a bankruptcy filing, credit scores do tend to vary. However, many of our clients tell us their mailboxes get flooded with offers like car loans. In some cases, these offers start rolling in just a week or two after their filing!
We can’t say that these types of offers are necessarily a good deal. Many loans targeted to people right after they’ve filed for bankruptcy often come with sky-high interest rates and unfavorable terms. But what these offers do show you is that bankruptcy does not scare away lenders.
In fact, lenders may find you more appealing after your bankruptcy than before!. Take a minute to look at your situation from a lender’s perspective. You still have the same job and many of the same assets. But now, you have fewer debts.
After bankruptcy, many people are still making payments on debts like their mortgage, cars, or student loans. These debts that you did not discharge in your bankruptcy are still being reported to the credit scoring companies. As you continue to make on-time payments, your credit score will increase over time. You’ll likely find that your credit score will be as good, or even better, than before your bankruptcy.
The great news is, just two years after their bankruptcies, many of our clients report a credit score of around 720. To put that score into perspective, Experian reports that currently, the average credit score in Minnesota is 733.
Many lenders consider a credit score of 720 to be on the cusp of “good” and “great” ratings. If you choose to seek out a loan or credit card with that score, you’ll likely find offers with attractive interest rates and terms.
Should I monitor my credit score after bankruptcy?
Our clients often wonder if they should check their credit reports after bankruptcy, even if they haven’t acquired new debt. Our answer is a resounding, “Yes.” Credit reports can and do contain errors. After a bankruptcy, you want to make sure that any discharged debts are noted as such.
There are three major credit reporting companies: Experian, Equifax, and TransUnion. According to federal law, you can request a free copy of your credit report once every 12 months. We encourage our clients to obtain a copy from all three agencies, as the information on each report can vary.
When you file bankruptcy with us, we’ll help you dispute any errors on your credit report. Bring your credit report to us, and we’ll help you resolve any issues.
Will filing for bankruptcy affect my credit score forever?
Bankruptcy does not remain on your credit report forever. If you file Chapter 7 bankruptcy the filing will fall off your report after 10 years. If you filed Chapter 13, the bankruptcy will be deleted after seven years.
Get on the Path to Better Credit Today
Wage garnishments and past-due debts never look good on a credit report. Filing for bankruptcy is taking control of your financial situation. If you’re overwhelmed by debt, contact us today. We’ll go over your particular situation and discuss if bankruptcy is a good choice for you.