In some cases, it may take years to rebuild your credit fully and reach a point where you can apply for credit cards and receive the lowest rates on interest, as well as enjoy approval for car loans, personal loans, and mortgages.
Read on to discover the relationship between filing for bankruptcy and your credit rating.
How Long Will Bankruptcy Stay on Your Credit Report?
According to Credit Bureau Experian, Chapter 7 and Chapter 13 bankruptcy can have a long-lasting impact on your credit report, but rebuilding your credit score is possible.
“Rebuilding your credit as soon as possible is paramount. One way to increase your credit score is to pay all your bills on time each month, creating and sticking to a budget and not incurring more debt.
You should also avoid overuse of credit cards and failing to pay balances in full each month. Having a good credit score gives consumers access to more types of loans and lower interest rates, which helps them pay off their debts sooner.”
For the months immediately after you undergo bankruptcy, you probably won’t qualify for any loans, credit cards, or credit-based items. You’ll find it almost impossible to buy a car with a loan or obtain an unsecured credit card. Although it may take seven to 10 years for bankruptcy to fall off your credit report, it won’t take that long to rebuild your credit score to a level where loans and credit cards are within reach.
Does Bankruptcy Put Home Ownership Out of Reach?
Getting approved for a mortgage the week after you file for bankruptcy probably isn’t going to happen, but it is possible to buy a home even if you file for bankruptcy. You may just need to wait and rebuild your credit after completing the bankruptcy process. In the short-term, you may find it difficult to get approval for a mortgage.
However, responsible use of credit over time will make it much more likely that you’ll achieve approval for a home in the future. Evidence of bankruptcy may stay on your credit report for a decade, but that doesn’t mean you’ll need to wait ten years before thinking about getting approved for a mortgage.
According to credit.com, the impact of bankruptcy diminishes each year.
“When rebuilding your credit after a bankruptcy, remember that time is on your side. Bankruptcy information will be considered in your credit scores for as long as it appears on your credit report, but its impact on your score lessens over time.
In fact, you may even see your score start improve a bit shortly after the bankruptcy hits your report. That’s because you technically no longer owe the debts that got discharged, which could help your credit utilization rate (how much debt you’re carrying versus your total credit limits).”
An increase in your credit score isn’t guaranteed, but it’s something that you can ensure by making on-time payments and using credit wisely.
For example, you may eventually want to purchase a car with a loan, and making on-time payments for the duration of your loan will help boost your credit score even if evidence of a past bankruptcy remains on your report.
Are You Thinking About Filing for Bankruptcy?
Are debt collectors calling you every day because of unpaid debts? Are you unable to pay your mortgage, student loans, and car loans? Has a financial catastrophe such as job loss or significant medical bills made bankruptcy your only viable option? Contact Suburban Legal Group for knowledgeable and experienced assistance with bankruptcy. Let us determine whether bankruptcy is the right option for you.
DISCLAIMER: All information on this website are provided for informational purposes only and are not intended to be construed as legal advice. Suburban Legal Group PC shall not be liable for any errors or inaccuracies contained herein, or any actions taken in reliance thereon.
