Bankruptcy and Your Credit Score

A bankruptcy is the worst negative record you can find in your credit report. Its impact can last for years, as the record will stay in your credit report for up to ten years. You may not be able to get any loans at all during the first few years after you filed bankruptcy. Even if you are lucky to qualify for a loan, the interest rate will probably be ridiculously high that it does not make sense to get the loan at all.

Despite its negative impact, it is an option to consider if you are very seriously in debt and have no way of repaying your bills. No doubt your credit rating will be in ruin but it will allow you to dig yourself out of the overwhelming debt and reestablish good credit rating later. At the same time, it will stop collection call agencies from harassing you and other debt-related problems.

However, do not use bankruptcy as an easy way out of debt. The procedure of bankruptcy can be emotional draining. After a bankruptcy, you will be ineligible for credit cards and other types of credit. There are also many restrictions you must adhere to. If you are seeking new employments, you may face a lot of rejections as well.

Before you file for bankruptcy, you should talk to credit counselors from reputable non-profit credit counseling organizations. These counselors are experience and will advise you if there is any other way out besides bankruptcy. If that is the only option, they can advise you how to go about filing for bankruptcy.

While a bankruptcy can be depressing, it will at least give you the chance to start all over again without the debt burden. And you should start your credit repair campaign as soon as you can after filing bankruptcy. Start cultivating good habits such as saving and budgeting. Spend on what you can afford. A drastic change of lifestyle may be necessary if you are used to spending lavishly.

You may want to get a secured credit card to re-build your credit history. Make sure the payment history is reported to the three major credit bureaus and you always pay your bills on time.

A bankruptcy record will not stay in your credit report forever. It should disappear after ten years. By that time, you should have already established a solid history of prompt payment and your credit score should have increase significantly.

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