The Effects of Bankruptcy On Your Credit Score

Your credit report is a historical document recording your financial past. You can’t go back and change history. The most negative information that can appear on your credit report is a bankruptcy filing. Bankruptcy may impact your ability to get credit of any type for several years after filing, and the filing itself will stay on your report for at least seven years. Creditors will likely see a bankruptcy as an indication that you are an extremely high credit risk and may not be able to repay a credit obligation. If creditors are willing to lend to you, chances are you will pay higher interest rates to offset the risk.

The flip side, however, is that bankruptcy can give you a fresh start and the ability to start rebuilding your credit. If you are caught in an endless debt cycle and are not able to meet your payments each month, chances are your credit is slowly edging downward with each and every late or missed payment. As long as the cycle continues it’s difficult to start repairing the damage.

Fear of how a bankruptcy filing will affect your credit score is not a good reason to dismiss the possibility of a bankruptcy filing. It’s important to weigh all your options and speak to a qualified professional who can advise you of the best course of action for your individual financial situation. There are certainly instances where bankruptcy is a choice that makes sense. While not a choice for everyone, bankruptcy can be helpful in solving a financial crisis.