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Bankruptcy And Its Effects On Credit Score

Credit Professor — Wed, 09 Feb 2011 21:58:19 +0000

Are you worried about filing a bankruptcy? You think bankruptcy can have a devastating effect on your credit report. Yes, you are right to some extent. Bankruptcy is regarded as a debt relief tool but it can affect the credit report sometimes. A bankruptcy remains on your credit report for almost 10 years and you are not allowed to file for it for another 6 years. After bankruptcy it becomes difficult for you to attain any more credit as the three digit number of your credit score which finally exhibits your creditworthiness got affected badly. It can potentially lower a good credit score by 100 or more points. All the above made statements are true but still there are ways to deal with bankruptcy and the poor credit score. If you have fighting spirit and a strong urge to bounce back you can recover your credit scores. However for that first you need to understand the effects that different type of bankruptcies have on your credit score.

Chapter 7 Bankruptcy

In Chapter 7 bankruptcy the debtor sells all their non-exempt property in order to repay as much of their unsecured debt as possible. He is discharged free from the left amount of debts. However it affects the debtors creditworthiness a lot. Creditors regard you as a credit risk. It makes your credit approval pretty difficult in the future. Few exceptions are there like federal student loans or home loan with a higher rate of interest or few mortgaged loans which can be obtained in spite of having a poor credit rating.

Chapter 13 Bankruptcy

Unlike chapter 7 bankruptcy, Chapter 13 bankruptcy gives you an opportunity to pay off all your credits within an extended time frame. It is meant for people with short time financial problems like job loss or huge medical bill. Debtor with a steady monthly income can opt for it. A chapter 13 bankruptcy does have a negative impact on your credit report but also shows your willingness and positive attitude to pay back your debts instead of escaping them. This often enhances your credit worthiness, and helps you to attain credit within 2 3 years.

How to recover your credit score after bankruptcy

Filing bankruptcy is a matter of public record and no one can keep it a hushed up secret. The effects of it on your credit score are also unavoidable. However there are a few ways out which can make the life after bankruptcy easier for you.

In case of chapter 7 bankruptcy, be sure your credit report shows 0 balances. The lenders should not complain against your debts being delinquent in future.

Find a new credit card. Secured credit card can also serve the purpose well. For near about 18 months, if you can make timely payments you will be eligible to hold an unsecured credit card soon.
Another way to gain credibility to the creditors is to request one of your friends to authorise you as his credit card user. Your bankruptcy would no way hurt your friends credit score but the account history of your friends credit card will have some positive effects on your credit report.

Filing for bankruptcy has negative consequences for you and your credit report for years to come. Added to these is the disgrace and embarrassment you have to face during the entire process. It teaches you few lessons of a lifetime. For the rest of your life you stay away from debts or financial difficulties and maintain your credit report neatly without committing any more mistakes.

Stop paying or file bankruptcy: What to do?

Credit Professor — Sun, 06 Feb 2011 18:09:46 +0000

Q: I read in the latest AARP magazine, it was better to just not pay your credit card bills instead of bankruptcy. Is that true? What are the consequences? I only get a little over $ 1,000 per month in Social Security, and that is my only income. I’m 76 and living in retirement homes. I am broke and can hardly use one of the things. I always want to pay my rent on time, so I’m not there in difficulty. Please help.
A: In some cases it may be more appropriate to simply stop paying your credit card accounts instead of filing for bankruptcy, but that does not move come with consequences. Some are also more pay their credit card bills, rather than filing bankruptcy, because protected their claims are on social protection in most cases of seizure by the Social Security Act (if your creditor is the IRS or other federal agency, your benefits could be garnisheed) and they do not own a house or other large asset on which placed a lien to secure payment could be.

But just because the credit card issuer can not garnishee your Social Security benefits and you have no real estate or other assets that do not necessarily mean, you should provide the backups by filing for bankruptcy skip.

If you stop paying your credit card bills, your card issuer eventually charge from the account – generally, if the account is not paid for 180 days – and turn it to collections either by selling the debt to an external collector or to an internal collector. Then you will start receiving calls collection. These calls can be can be very disturbing and will not end just because the debt collector you do not have the money to pay to tell.

The collection process can be up to the point where collectors escalate sued. You would have to appear in court or send documents to the court that your only income from social benefits to prove and you do not have enough income to pay the collector.

If you do not appear or respond, the collector can judge, with the garnishee your bank account can be granted. Your bank does not need to know that all funds are in your account and therefore benefits from the wage garnishment, so that they allow the garnishment order.

You would have to prove that all agents are on the account benefits and wait for the money back into your account. While you wait for your money for renovation, you may miss rent, and other important payments.

Rather than possible with the collector and collection activities could be better, go ahead and file for bankruptcy protection. Since you have a very low income, you would most likely qualify a Chapter 7 bankruptcy filing, which eliminate your debt with the credit card companies.

The bonus is that once your application has been filed to stop all collection activity on accounts in bankruptcy must immediately. You can search for a pro bono bankruptcy attorney at the American Bankruptcy Institute’s website.

Todd Ossenfort is a board member of the Association of Independent Consumer Credit Counseling Agencies. He answers readers’ questions for www.creditcards.com To ask a question, e-mail Editors@CreditCards.com

Factors That Lower Your Credit Score

Credit Professor — Sun, 19 Apr 2009 16:03:38 +0000

Any people know ways to increase their credit score, but what factors actually lower your credit score?

1) Accounts that have been open less than three years. Having long term credit accounts that you consistently pay on time is an important indicator of stability. As your credit history ages, your score should increase.

2) Anytime your credit report is pulled. This is if you apply for a loan and the lender requests a copy of your report, or you order a copy of your credit report yourself directly from the credit bureau. This is when an inquiry is added to your report. Hard inquires are bad, soft inquiries are ok. Hard inquired are from creditors and lenders with whom you have applied for credit or a loan. A Soft Inquiry is when you request your own copy of your report or when an employer checks your credit history. Lenders and creditors do not see these inquiries. Inquiries remain on your report for up to 2 years.

3) An account that goes unpaid or becomes delinquent.

4) Bankruptcy.

5) Closing old accounts. Having old accounts open, even if they are not used regularly, is good for your credit score.

6) Constantly using too high of a percentage of your credit line. For example, it is good to stay under the 30% mark for the amount of credit your have used in your credit line.