The Effects of Bankruptcy on Your Credit

Have you heard the latest buzz among financially troubled people? More and more people have been more open to file for bankruptcy. This serves as a way to erase all of their outstanding debts and give them a fresh start. However, filing for bankruptcy does have its negative effects. Even though it gives people the chance to erase their debts, it would still have a great impact on your credit scores. And even though there are sites like that can help minimize its negative impact, the effects of bankruptcy can still take it toll.

Sometimes doing a bankruptcy can be a sign of relief for a person who is totally broke. This would help bring an end to intimidating letters you receive from different lending companies. Agents would no longer have to flood your answering machine, making phone calls almost every day. Actually, the effect on your credit score will also have to rely on the type of bankruptcy that you have filed.

If you wish to know how bankruptcy could affect your credit score, please read further – this informative article will provide explanations that will allow you to understand the relationship between bankruptcy and credit scores.

Deductions On Credit Scores

Once you file for bankruptcy, your credit scores would automatically receive a 220 point deduction. This would greatly affect your records, especially if you did not have satisfactory credit scores, in the first place. This will be a great problem if you do not know how to rebuild credit scores and improve them within a specific time frame; a company that can show you how to do just that, is

However, if you are confident that you could eventually recover from your financial burdens (and repair your bad credit), you should not worry much about declaring bankruptcy. Now that you had the advantage of erasing all your debts, you should grab this big opportunity, and adopt new financial habits that could change your life.

Bankruptcy Haunts You For Years

Aside from lowered credit scores, your claim for bankruptcy would also haunt your finances, for a relatively long period. It can stay on your credit report(s) for a good seven years or more, thus making it hard for you to carry out major transactions (like buying a car or a home). Getting loans would also be twice as hard than before you filed for bankruptcy. Lenders and sellers might become hesitant to offer you their products or services, once they see your record of bankruptcy.

Although you can delete a debt collector, like Stellar Collections, this deleted item would stay in your credit records for about seven years. These would serve as evidence of your financial hardships, hence making you look like a risky investment, for most lenders and home sellers.

Here is one simple tip about buying a real estate property after an episode of declared bankruptcy. Look for different lending institutions or banks that offer lenient services. Some lenders still accept borrowers with records of bankruptcy, as long as they were able to rebuild their credit in two or more years. Thus, you do not need to wait for seven years before applying for a mortgage. All you need to do is to wait for two more years after your stated bankruptcy, and rebuild your finances until two years have gone by.

What Makes Bankruptcy So Difficult To Handle?

Aside from the complications that bankruptcy brings during applications for mortgages and loans, it also gives borrowers a hard time in signing up for other credit lines or acquiring insurance premiums. Insurance premiums (for people who have experienced bankruptcy) are more expensive than those who have maintained stable financial track record. Meanwhile, credit lines would also reject your applications once they see a bankruptcy of any kind. You would be classified as a “high-risk” client, hence making them reject your applications.

Re-establishing your credit score from bankruptcy will be difficult, but it is not impossible. You can find secured credit cards, which usually max out at $500. By using this credit card for small purchases that you can pay off immediately, you are building good credit. You may also find yourself eligible for gas cards, which works the same way. Also, mortgages may help to rebuild your credit, after bankruptcy. Oftentimes, two to three years after declaring bankruptcy, you may be eligible for an FHA loan that has moderate interest rates. Paying your mortgage on time will give your credit a big boost.

Always remember these things before filing for bankruptcy. Keep in mind that bankruptcy is not an easy way out of your financial burdens. It also causes some negative consequences on your credit records, as well as financial transactions with other people.