For many people who are struggling with unmanageable debt, declaring bankruptcy is a big financial decision and one that will have a negative impact on their credit score. But, how much of a blow your score takes depends on what state your credit is in before filing.
The average credit score is around 680, so if you have a high credit score before you file, the bankruptcy will likely hurt your score, but not as dramatically as if your score was already below the 600 mark. In fact, a study conducted by FICO found that on average, someone with a credit score of 780 will see it drop 160 points after bankruptcy, while someone with a lower score before bankruptcy (say in the 500s) will only see their score plummet by about 80 points.
In addition, it’s important to remember that bankruptcy is listed on a person’s credit report for years afterward, so it will be a major red flag for potential lenders. This is why it’s so important to have a solid plan for rebuilding your credit after the bankruptcy and bankruptcy attorney Maui can help you with that.
Credit is a big factor in your quality of life, and the ability to qualify for loans and mortgages. It’s for this reason that most people who declare bankruptcy are able to secure credit again within a few years after the bankruptcy is discharged.
It is important to keep in mind that your credit will continue to be affected by other factors even after the bankruptcy is over, including missed payments, accounts in collections, wage garnishment and foreclosures. In some cases, these events can have a greater effect on your credit than the bankruptcy itself.
Ultimately, if you’re struggling with unmanageable debt and have little hope of repaying your creditors, bankruptcy may be the right option for you. But, it’s always a good idea to consult with a professional credit counselor first to explore all of your options, and to learn more about how bankruptcy will affect your credit score.
Cain & Herren, ALC
2141 W Vineyard St, Wailuku,
HI 96793, USA
+1 (808) 242 9350
cainandherren.com
