How Will Bankruptcy Affect My Credit Rating?

Bankruptcy has been hailed the last stop on the road to financial ruin, but does it really have such a devastating effect on the credit rating? Although the truth is, the credit score can be effected for up to ten years, there are methods that consumers can take to build the credit rating and use credit despite the notations of bankruptcy through the credit report.

Although bankruptcy will be seen on the credit report by potential lenders, there will also be discharges – which are known to be worse for the credit score than collections accounts. It can be impossible to remove these accounts as they have more than likely remained unpaid and have a negative effect on the credit score. These accounts remain on the credit report for seven years, upon at which time they are removed from the account.

For up to ten years the consumer will be faced with the stigma of bankruptcy and be subject to rejections from lenders in the form of mortgages, loans and credit card offers. Consumers that have declared bankruptcy in the past are of the highest risk and therefore even if they are approved for a certain offer, they will be subject to the highest of interest rates.

Assets that have been gained throughout the lifetime are liable to be repossessed to cover costs associated with the bankruptcy. No longer will the consumer be able to maintain these assets and they will be removed from the credit file.

If you have recently filed personal bankruptcy, one of the smartest things to do is to make use of a secured credit card. This can be complete by providing a deposit to a credit card company that is equal to or less than the credit limit that has been offered, and begin to use the credit card. This will allow you to begin establishing credit history from the moment that you have declared bankruptcy. Rebuilding your credit rating cannot wait. At the time when the bankruptcy judgments are removed from the account, many consumers are left with no data. Using a secured credit card will ensure that credit history is developed. Be sure to use the card wisely and develop a positive relationship with the client. Over time, this could lead to eligibility for a non-secured credit card, even despite the bankruptcy.

It is important to determine the effects of the bankruptcy on the credit rating, the assets that have been accumulated and how the bankruptcy will affect your personal financial situation in the future. Do you have plans to purchase a home in the future?

Image by Raymond Brown.

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