Improving Your Credit Score with Bankruptcy
How bad is your credit score now?
Your credit score reflects activity on the accounts you have with banks, retailers, credit-card issuers, utility companies and other lenders, including your payment pattern over the past two years. Late payments, account write-offs, judgments, repossessions, tax liens and foreclosures will all bring your score down. Your credit score is only a snapshot in time - it reflects only your credit worthiness as of the date that it is computed. It is computed based on a variety of factors, which are weighted and scored as follows:
- How you pay your bills (35%)
- Amount of money you owe/amount of available credit (30%)
- Length of credit history (15%)
- Mix of credit (10%)
- New credit applications (10%)
Take a step back and take a look at the big picture.
If your credit is already damaged, bankruptcy may actually improve it. A bankruptcy will improve your "income to debt ratio". That is, your income will be the same after bankruptcy but you will have much less debt. Two years after bankruptcy you can obtain an FHA mortgage, at regular interest rates, as long as you otherwise qualify. Many people who file bankruptcy get reasonable interest auto loans within 1 or 2 years of discharge and many get unsecured credit cards as well. Although bankruptcy can remain on your credit reports for up to 10 years many people who make reasonable efforts to re-establish their credit may have adequate credit within 2 to 3 years of bankruptcy.
How can you rehabilitate your credit score the quickest?
While a bankruptcy filing may have an immediate negative affect on your credit score, the lower your existing score is the less the affect that a bankruptcy filing will have on it. Some people can improve their credit score immediately with a bankruptcy filing. In the long run a bankruptcy filing may be your best option to ultimately rehabilitate your score if the burden of your existing debt leaves you with the prospect of more late payments, judgments or other negative events going forward.
The decision of whether to file for bankruptcy protection is a very serious one. Call or e-mail to set up a no cost appointment for more ideas on how to re-establish your credit after bankruptcy.
