When considering bankruptcy, people frequently express a concern that they will not be able to acquire debt later on. One might need to finance a vehicle or purchase a home and bankruptcy can affect these kinds of choices. What will one’s credit score look like a year from filing bankruptcy? How does filing affect one’s ability to finance debt in the next year or two? While a Chapter 7 bankruptcy might appear on your credit report for ten years (and a Chapter 13 for seven years), in my experience you will be able to have access to credit soon after your bankruptcy.
Credit Score Study
In 2017, LendingTree released a study that sampled over one million of its users which found that 43% of people who filed bankruptcy had a credit score of 640 or higher within a year of filing their case. Within two years of filing, 65% saw a credit score above 640.
But will you have to pay more to borrow? According to its study, LendingTree indicates that on a typical $15,000 auto loan one might expect to spend an additional $2,171 to finance such a loan within a year of filing whereas the extra cost is only $799 for those who waited at least two years after filing bankruptcy.
Annual Percentage Rate
In the study, the average APR for vehicle loans offered to those who never filed bankruptcy was 7.84%. Compare this to the interest offered one year after filing, 12.72%. Just a year after that, the average APR drops to 10.35% and then 9.67% in three years after filing.
For mortgages, the ability to finance opens up after the second year has passed from your bankruptcy filing. For individuals who have never filed, the average APR was 4.12% and the interest rate, on average, offered two years after the filing was just a bit higher at 4.29%.
If you have any questions about filing bankruptcy or how to start fixing your credit when your case has been completed, please feel free to reach out to your Fairfield bankruptcy attorney at (707) 385-0422.