Can Your Credit Score Go Up After A Bankruptcy?
One thing people are often surprised by is that they see their credit score go up immediately following a bankruptcy. If you're hesitant to file bankruptcy because you're worried about your credit score, you shouldn't be — though it's not as simple as being an "immediate fix." Here's what you need to know about how bankruptcy impacts your credit score.
Why Your Credit Score Might Go Up After Bankruptcy
In the lead-up to bankruptcy, it's likely that you'll stop paying many of your bills. This can cause your credit score to go down dangerously low, to the 300 to 500 range. When you declare bankruptcy, many of the adverse accounts on your credit report are going to be closed and removed. You will no longer be late on bills. Consequently, you could see your score jump anywhere from 100 to 200 points.
This is the system working as intended; bankruptcy is intended to get rid of your debts and give you a fresh start. However, that doesn't mean that you can start accruing debt again, for one simple reason: your bankruptcy is still on your file.
How Your Bankruptcy Hits Your Credit Report
A bankruptcy will be listed on your credit report. It will fall off after seven years. During those seven years, it actually will have an adverse impact on your credit score in and of itself. However, the closed accounts, lack of late payments, and lack of credit debt may improve your score to the point where that adverse impact doesn't matter.
The important thing to remember is that creditors, lenders, and even landlords will still look to see whether you have a bankruptcy on your report. Even though you may have good credit, you may not be able to start using it for some time.
That being said, most creditors and lenders aren't interested in a bankruptcy that's more than three or four years old. Some lenders even like to lend to people who have recently declared bankruptcy because they will not be able to declare bankruptcy again for some time.
Bankruptcy is a complex process, but it's meant to give you a good financial foundation and restore your credit. Thus, it really isn't unusual that it could actually improve your credit score. For more information about taking control over your finances, you can contact a bankruptcy law firm. A bankruptcy law firm can tell you whether it's the right solution for your situation.