15 Dec Are Bankruptcy and Credit Score The Two Sides of A Coin?
If you think filing for bankruptcy is the end of the world, you’re wide of the mark. Although, it’s true that bankruptcy can be a serious concern for your credit, typically discharging your debt is a positive which eventually lessens the adverse impact of the bankruptcy.
Doing the correct things after bankruptcy typically results in a higher score than prior to bankruptcy. Essentially you are given a clean slate to build your credit.
How does bankruptcy hit your credit score?
The extent to which bankruptcy can hurt your credit score is based on your situation prior to filing bankruptcy. If you maintained a high credit score, the score will most likely lower for a certain period.
On the contrary, if your credit score was average or below average, or you amassed a substantial debt, filing bankruptcy can actually improve your score as you get rid of all your debt obligations and credit derogatory. Fundamentally, bankruptcy, prepares you to increase your credit score.
Although no one except the credit reporting agencies have the exact formula, we know around 30 percent of your credit score is decided by your previous payment credentials. Another 30 percent is directed by how much you owe to the creditors.
Credit scoring companies in Minneapolis pore over several factors when calculating your credit score:
- The payment history – how late have you paid the bills, have you filed for insolvency, have you applied for a new credit
- The outstanding debt
- The span of the credit history
- Your income to debt ratio
- Your Percentage of credit usage
How long will the bankruptcy information reflect on your credit report?
This is determined by the type of bankruptcy you file. Filing Chapter 7 bankruptcy in Minnesota will subject your history to stay put for 10 years from the time of filing. The same is true for Chapter 11 bankruptcy. Besides, Chapter 13 bankruptcy remains listed in your credit report for 8 years.
Will you be eligible for credit after filing bankruptcy?
You can obtain credit.
Once you’re discharged from the bankruptcy court, in most cases, you can expect to receive offers for fresh credit almost instantly. When your bankruptcy period winds up, you may also get new credit card offers.
Likewise, you can acquire credit while still under Minnesota Chapter 13 Bankruptcy.
Credit offers post-bankruptcy filing typically have a higher interest rate associated with them. However, obtaining new credit will help to increase your score. Also, if the credit card balance is paid in full each month the interest rate does not matter.
Creditors offer new credit on the grounds that after post an insolvency release, you are without financial obligations and can’t file another bankruptcy for many years. This implies you can’t discharge any accrued debt amid this period. The credit card companies are aware of this rule.
If you’re ready to increase up your credit score, you can join forces with a professional and knowledgeable Minneapolis Bankruptcy Lawyer from Bolinske Law, a well-known debt relief agency. In the free consultation, you will receive personal recommendations on how to solve your debt problems and ultimately increase your credit score.