What effect will filing for bankruptcy have on your credit score?
Often people who file bankruptcy wonder what will happen to their credit score after filing bankruptcy and have concerns about the balances on their accounts. The answer to this is the credit report will not show any balances on the accounts as the creditor can no longer report to the credit bureaus about the debt. However, the credit score will increase or decrease based on a number of factors and previous credit information. The major factors are:
Credit card or loan repayment history
Amount of debt owed
Length of credit history
Credit history is based on credit card repayment and the debt owed on these cards. If someone had a high balance on the cards and bad payment history may have an increase in the credit score after filling bankruptcy. On the contrary, for many others the bankruptcy will decrease the credit score.
However there are many ways your credit score can be improved after filing bankruptcy. The most important is paying your mortgage payment or car payment on time as some of the creditors do report these payments to the credit bureau if the debt is been reaffirmed by bankruptcy filer. You may also choose to open new credit accounts or obtain the secured card or prepaid cards, which may require a security deposit and allow the cardholders to use the limited allowed money. This is reported to the credit bureau. Timely credit card payments will have a very positive effect on your credit score.
There are many services available, by paying a minimal fee that monitor accounts after filing bankruptcy and dispute any incorrect information reported to the credit bureaus. They also correct discrepancies on the credit report.
Managing money wisely by monitoring interest and only using credit card when you can pay the balance in full each month will help you increase your credit score and become more financially secure.