How does bankruptcy affect my credit score?

by matteo.zboncak , in category: Banking and Credit , a year ago

How does bankruptcy affect my credit score?

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1 answer

by khalil_ward , a year ago


Filing for bankruptcy can have a significant negative impact on your credit score. It is considered one of the most damaging events for your credit history and can stay on your credit report for up to 10 years. The specific impact on your credit score depends on your overall credit history and score prior to filing for bankruptcy.

In general, you can expect your credit score to decrease by a significant amount after bankruptcy. The exact decrease will vary, but it is not uncommon for scores to drop by 100-200 points or more. This is largely due to the fact that bankruptcy implies that you were unable to fulfill your financial obligations and can signal to lenders that you are higher risk.

However, the impact of bankruptcy on your credit score tends to diminish over time as long as you actively work to rebuild your credit. Taking steps such as making timely payments, keeping credit utilization low, and responsibly managing new credit can gradually improve your credit score over time. It's important to note that while bankruptcy remains on your credit report, its impact on your credit score lessens as the bankruptcy becomes more distant.

It's also worth mentioning that some lenders may be hesitant to extend credit to individuals who have filed for bankruptcy, or they may offer higher interest rates and less favorable terms. Therefore, it's important to be selective when applying for credit and work towards reestablishing your creditworthiness after bankruptcy.