Does Filing For Bankruptcy Affect Your Credit Score?
Many Americans struggle financially as it is. An unexpected event, such as a job loss, medical bill, or major car repair, can easily set someone over the edge. They may have to file for bankruptcy in order to survive.
Bankruptcy does not have the stigma it once did. In 2023, there were more than 445,000 bankruptcies in the United States alone. However, filing for bankruptcy is not always an easy decision to make because it comes with some disadvantages. For example, it can negatively impact your credit score.
Regarding your FICO score, bankruptcy will always be viewed as a negative event. If a bankruptcy is listed on your credit report, your credit score will be affected for years to come. This means that getting new credit or loans for cars or houses will be very hard. Depending on the type of bankruptcy you file, it will stay on your credit report for 7 to 10 years.
The higher your credit score, the more you will be affected. Someone with a credit score of 780 or above could see their score drop by as many as 240 points, while someone with a score of 680 could lose 130 to 150 points.
Bankruptcy affects your credit score so much because it indicates financial instability and an inability to manage debt responsibly. Lenders may view you as a higher-risk borrower, making it harder to obtain credit in the future. Even if you are able to obtain credit, you may face higher interest rates and less favorable terms.
However, it is worth noting that the impact of bankruptcy on your credit score lessens over time, especially if you take steps to rebuild your credit. This includes:
- Making timely payments on any remaining debts.
- Keeping credit card balances low.
- Applying for a secured credit card or a credit-builder loan.
- Regularly monitoring your credit report for inaccuracies and disputing any errors.
While bankruptcy does have a significant impact on your credit score, you need to stay positive. Although bankruptcy will remain on your credit report for 7 to 10 years, it should affect your ability to borrow for only 18 months.
Contact Our West Palm Beach Bankruptcy Attorney Today
Bankruptcy happens fairly often, but there are still a lot of rumors and myths about it. Get the facts from an experienced lawyer.
Count on West Palm Beach bankruptcy attorney Brian K. McMahon, P.A., to give you the truth about bankruptcy. We have more than 30 years of experience. We will evaluate your situation and advise you of your rights and options. To schedule a consultation, call (561) 658-1789 or fill out the online form. We serve the West Palm Beach, Boca Raton, Port St. Lucie, and South Florida areas.