Declaring bankruptcy is a big decision. While it may be the best choice for your circumstances, it does have lasting effects, like what happens to your credit score after bankruptcy.
How Much Will Your Credit Score Drop?
A bankruptcy case filing often results in a drop in your credit score. But how much? There is no set formula to answer this question, as many variables come into play. A lot depends on what your score was, to begin with.
FICO Scores range from 350 to 850. The higher your score, the bigger the drop you can expect to see when filing for bankruptcy.
Most people who file bankruptcy have already damaged their credit score. A credit score below 580 is considered “very poor”. If you declare bankruptcy with a 500 credit score, you're not going to drop too much farther.
However, if you've managed to keep your credit score above 700 before bankruptcy you can expect a 200 or greater drop.
Essentially, regardless of what your score was at the start, most people who file for bankruptcy end up having similarly low FICO scores after filing. Importantly, after a discharge of debt has been issued by the Court, your credit score will begin to increase especially if the filer continues to pay on secured debt.
Bankruptcy, Credit Score, and Credit Cards
A bankruptcy and low credit score will make it challenging to get approved immediately for new credit cards. It's not impossible, but you should expect to pay significantly higher interest rates and have lower spending limits.
When you're applying for a credit card after bankruptcy you'll have to search for low-credit score cards. Secured credit cards will give you the highest approval odds. A secured credit card requires you to pay a refundable security deposit. This type of card is a good start towards repairing your credit and raising your credit score.
How Long Will Bankruptcy Show Up on My Credit Report?
Your credit report will show that you filed for bankruptcy for at least seven or ten years, depending on the type of bankruptcy you file. Chapter 7 bankruptcy will stay on your record for ten years, while Chapter 13 will stay on the record for seven years.
If you're trying to apply for a loan or get approved for a lease, there are some institutions that won't approve someone with bankruptcy at all. Don’t be discouraged; there are ways to get what you need. For example, having a co-signer on a loan or lease may be all that is required for approval.
Remember, although your bankruptcy will appear on your credit report for years following your discharge, you can start rebuilding your credit right away.
Your Credit Score After Bankruptcy
When you declare bankruptcy, it's not all bad news. Your credit score after bankruptcy will drop, but you won't have the exasperating debt and payments to make every month. This gives you the chance for a fresh start.
You can put that money towards payments for a new low-credit or secured credit card, and work on increasing your credit score. There are several other steps you can take towards rebuilding your credit score after bankruptcy.
Contact an Arlington, Texas Bankruptcy Attorney Today!
If you still have questions about how bankruptcy will affect your credit score, or if you’re not sure if bankruptcy is the best option for you, we’re to help!
Call the Law Office of Marilyn D. Garner at 817.381.9292 for a free consultation today!