Credit reports could in some way be considered your financial “report card”. It seems there are countless products, websites, services, and blogs dedicated to your credit report. Because your credit report is so very important to where you live, what kind of automobile you drive, and the job you have, we thought it prudent to discuss your credit report, to include what it shows and how your debt affects the report. We’ll also give you a better idea of how bankruptcy affects your credit report and what to expect when you file for bankruptcy in Auburn, or the other locations in which we provide service.
What’s My Credit Score?
Your credit score says a lot about you, including how responsible you are, as well as, how willing you are to pay off a loan. The good news is that with the rising awareness of the importance of credit, it has become increasingly easy to determine the health of your credit. Countless websites offer free credit scores from a combination of the three major credit bureaus, which gather and sell credit information about consumers to creditors, employers, insurers, government agencies, and others with a business interest in your credit information. The three major credit bureaus include Equifax, Experian, and TransUnion. The information that is contained in each report includes your identifying information, credit information, credit inquires, and public record information such as foreclosures, tax liens, and bankruptcy filings.
How Does Bankruptcy Affect My Credit Score?
Your credit score is comprised of things like your open, active, and closed credit accounts, what type of accounts they are (auto, student loans, home loans, etc.), and your payment history. In order to understand how bankruptcy affects your credit score, you first need to understand how derogatory or negative information affects your credit. Anytime you are late on a payment, have a credit account “charged off” or closed, have financial judgments against you, or have an account sent to collections, your credit score drops.Furthermore, that information typically stays on your report for up to seven years.
Tax liens, federal student loans, and foreclosures also stay on your credit report for seven years, and these things can push your score down tremendously. When filing bankruptcy, the information can appear on your credit report for up to 10 years. Again, all this information appearing on your credit report can lower score to below the 600 mark, but your actual score will depend on the total mix of all your credit activity.
Can Bankruptcy Improve My Credit Score?
Contrary to popular believe, bankruptcy can actually improve your credit score in certain situations. If your credit score is currently being affected by unsecured debt such as credit card debt, judgments, and medical debt that you won’t be able to pay off within five years, it makes sense to contact a bankruptcy lawyer to discuss your situation. Once you file bankruptcy, your credit score will drop; however, it’s usually a one-time drop that will put you in a situation where you can being improving your financial situation, discharging certain debts that continue to hurt your credit month after month, and putting you back on the path to being able to make all your payments on time.
The decision to file bankruptcy ends up being a comparison between what is worse for your credit: a one-time drop or a continuous decline in your score. In many ways, filing bankruptcy is similar to a forest fire that burns out all the old and stifling decay so that new life can begin and contribute to a healthy forest once again. Once you exit bankruptcy, your credit score often increases and will show future creditors, insurers, and employers that while you had issues with debt, you took the proper steps needed to correct the mistakes and to get back on the correct financial footing.
If you are struggling with poor credit and mounting debt, contact your local bankruptcy lawyer in Fairfield California, or any of the other locations in which we offer services, for an initial consultation that will give you more information needed to make an informed decision.