While not all bankruptcies cause a huge drop in a person’s credit score, it is possible a person’s score could rise after bankruptcy.
A consumer’s FICO score is one of the biggest determining factors in whether a person will receive approval for credit or financing. The FICO score will also help determine the interest rate a person receives on a credit card. Some lenders are willing to accept credit applications even with lower scores. However, if this happens, it is unlikely that the terms of the credit application will be favorable to the consumer.
The bankruptcy filing may or may not have a significant impact on the consumer’s credit score, depending on what the score was before the filing. The consumer’s payment history makes up approximately 35% of the person’s credit score. If the person had a poor payment history to begin with, the bankruptcy filing will not have as much of a noticeable impact on the score. If the person had an excellent credit score previously, the effect the bankruptcy will have on the credit score will be more significant.
The type of bankruptcy case being pursued will influence how long the bankruptcy stays on the person’s credit score. Typically, Chapter 7 bankruptcies will stay on a consumer’s credit report for up to 10 years after filing while a Chapter 13 bankruptcy will remain on a consumer’s credit report for seven years after the bankruptcy case is completed. Once that period is over, the bankruptcy case should be taken off the credit report, making receiving financing much easier.
The good news is credit can be rebuilt rather quickly after bankruptcy. The best way to do this is with time and a consistent repayment history. Showing a pattern of good spending habits and payment history following a bankruptcy case will not only boost the person’s score, but it will also help in being approved for credit. The more time that passes after a bankruptcy case appears on a credit report without any bad payment or spending history in between will also help the person be approved for credit in the future.
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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.