If you are considering a Chapter 7 bankruptcy, you may be concerned about how your credit score will be affected. Many people who are seriously thinking about bankruptcy already have poor credit and are afraid that a bankruptcy will bring their credit score down even more. Fortunately, any negative effects of bankruptcy tend to be temporary.
Initially, a person’s credit score is likely to decrease following a bankruptcy. However, this decrease is typically a very short term change. Once the bankruptcy is discharged and the debts have been removed, the credit score will start to increase. This is because credit score is partially based on how much debt a person has in total.
Another factor that affects credit score is how much debt a person has in relation to total available credit. Financial experts recommend that people who have filed a Chapter 7 bankruptcy that has been discharged obtain a credit card with a small line of credit so that their credit score will be improved with the introduction of available credit and a new positive payment history. Of course, it is important to avoid getting into debt with any new line of credit.
If you are afraid that filing for Chapter 7 bankruptcy will hurt your credit score, rest assured that it will likely improve your score over time. Continuous missed or late payments, mounting debt and accounts that are in collection will hurt a credit score far more than filing for bankruptcy.
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Article posted at Merchant Circle