Have a bad credit score? Considering filing for bankruptcy? You’re not alone. Thousands of people find themselves in the same situation every year. Often, they fear what filing bankruptcy will do to their credit score. If it’s already bad, will bankruptcy make it worse?
Fortunately, there are many cases where filing for bankruptcy actually improves your credit score. Filing clears bad debt and gives you a clean slate. With that bad debt gone, it’s not uncommon for a credit score to go up, and even get back to perfect in as little as two years.
How Your Credit Score is Calculated
Your credit score does not only take bankruptcy into consideration when being calculated. Instead, your score is based on many factors, including accumulated debt. With bankruptcy, accumulated debt disappears, often causing the score to rise.
In order to maintain the rise in your credit score, of course, you’ll need to take steps to rebuild your credit. Make careful choices moving forward with your credit. This may mean turning down credit card offers from companies who send you offers now that your credit score is back up. While you can accept new credit cards, your approval will depend on what you are applying for and who the lender is.
Life After Debt
As time passes after a bankruptcy and you prove to have improved your credit practices, lenders will become increasingly receptive to extending credit. At first, interest rates may be higher, but once you are responsibly handling debt again, the effort will show on your credit report.
Regardless of whether or not you’ve filed bankruptcy, lenders have access to your history and can see if you’ve recently made a change in your habits. Demonstrate your ability to handle credit responsibly, and there’s no reason not to believe you can’t have good credit.
Have more questions about debt and bankruptcy? Reach out to us here at Top Gun Bankruptcy for answers!