Your Credit Score After Bankruptcy
If you've always been curious, how bankruptcy can impact your credit, then this information can help you answer that question. Hopefully you will then be a few steps ahead in your knowledge of bankruptcy and how it can affect you. This informative article will answer that nagging question: How does bankruptcy affect my FICO score?
A bankruptcy will affect your FICO score negatively because bankruptcy is a proclamation to the world that you are not able to pay your bills. The acronym FICO stands for; "Fair, Isaac and Company". This is the company that developed the software system (or formula) that puts a credit score on your credit record. It is one of the most popular, if not the most popular way lending institutions make their decisions on who to lend their money to. Literally billions of credit decisions are based on the FICO score. Since this score is so widely used it is plain to see that the question; " How does bankruptcy affect my FICO score ?" would be an easy one to answer.
Once you come of out of bankruptcy and successfully discharge your debts, it’s time to start looking for credit. It’s important to be very cautious when applying for new credit cards as you will be surprised how many offers will accept you even though you’ve just recently gone through bankruptcy. To improve your credit score you should take on a couple credit cards with a decent balance of say $1,000 to $2,000 and only charge what you can afford to pay off each month.
Your bankruptcy will most likely have dealt a pretty rough blow to your raw credit score – it could possibly be in the 400 to 500 range immediately after your debts are discharged. Stay disciplined and live beneath your means and you could find yourself quickly rebuilding your credit score. There are plenty of example of people who bought their credit scores back up to 600 and approaching 700 just 3-4 years after bankruptcy. It’s not an easy road, but you can get your score back up there with the right approach.
A bankruptcy can legally stay on your credit report for up to a decade, but the effect on your overall score will immediately diminish as soon as your bankruptcy case is closed. Even though it’s tempting you can’t live on a cash basis to rebuild your credit. You’re going to have to get out there, open up a few charge cards and your score will come back – given enough time. Treat a bankruptcy as a wake up call to change bad habits. Maybe you were a shopaholic and an over spender – given the state of the economy It’s not a bad idea to cut back and learn to do a little more window shopping.
