How Bankruptcy Affects Your Future Credit and Loan Opportunities
If you are unable to repay your debts, you have very limited options other than filing for bankruptcy. Unfortunately, filing for bankruptcy can negatively affect your future credit and loan opportunities. Here are some of the ways that bankruptcy can affect your financial future.
Bankruptcy Has an Immediate Impact on Your Credit Score
Depending on your situation, bankruptcy has the potential to knock about 200 points off your credit score. If you have an average score of 680, you can lose between 130 and 150 points in bankruptcy. A person with a 780 score can easily lose between 200 and 240 points in bankruptcy. The loss of credit score points can affect your ability to secure loans in the future, especially because lenders consider your credit score before giving you a loan.
A Long-Term Effect on Your Credit Report
Unfortunately, some credit reports can stay on for a longer time, depending on the type of bankruptcy. If you incur a Chapter 7 bankruptcy, it will remain on your report for ten years. A Chapter 13 bankruptcy stays on your record for 7 years. The longer you have that credit report, the longer it will take you to get new credit, as the bankruptcy mark will still be present in your credit report.
How to Rebuild Your Credit Score
Ultimately, you can get out of the red if you work hard toward regaining your financial stability. However, rebuilding your credit score after bankruptcy is a gradual process that requires consistent financial discipline. Still, you can adopt different strategies, such as getting a credit card that has a small limit or getting a credit card that allows you to deposit cash as collateral. You should then use any one of these cards responsibly, paying off the balances each month in full. Paying off your bills and loans on time can rebuild your credit score with time.
Future Loan Opportunities
Bankruptcy can sometimes be inevitable, especially when you lose your source of income and you have outstanding loans to pay. Filing for bankruptcy is the safest way to get your creditors off your back as you find ways to offset any loan balances. For expert guidance on bankruptcy and debt problems, contact O’Brien Law Firm, LLC, today.
