Financial health is considered as one of the most important aspects of a person’s life. However, there will be instances when your financial standing is not as good as you wanted it to be, no matter how hard you try. This could be because of the long list of monetary obligations you owe to your creditors and you do not have sufficient financial resources to pay them back. Scenarios like these may usually lead you to file for bankruptcy as you may view this as the best alternative to end your misery of paying debts. Sure, you will always have this option but you should also remember that filing for bankruptcy is not all good. When you file for bankruptcy, your credit score may be seriously affected. If you still don’t get the connection between your credit and bankruptcy, read on to know more:
- Bankruptcy Damages Your Credit Score A Lot – There is no better way to describe the possible negative effects brought by filing a bankruptcy to your credit. During these times, you have to expect the worst that may possibly happen to your credit score, you can learn more here: https://www.crediful.com/bankruptcy-on-your-credit-report/. This financial hardship is said to be one of the worst scenario cases that may occur when dealing with your financial obligations. It may drop down your good credit score depending on the actual value involved in the process. In this sense, the higher your credit is, the higher the decrease is. For example, when you possess a credit score of 800 or above, it may fall down to 200 or 300 points. At some point, it may appear impossible to rehabilitate your financial health and difficult to handle the major decline of your credit. The damage is obviously huge that it would require you to improve how you manage your financial goals.
- Filing For Bankruptcy Might Mean Financial Difficulties For You – So you think that when you file for bankruptcy, everything is resolved, right? You’re wrong! Because even if you file for bankruptcy, you are still required to shed off a certain amount of money. You need money to pay for all of the filing fees so you can ensure that this process will be as smooth as possible. Aside from the filing fees, this process also requires you, to take a financial management course and credit counselling – yes, this means that you have to pay for all of these. If you don’t have any savings the moment you filed for bankruptcy, your only option to pay for all of these is by acquiring credit and acquiring too much credit is never good for your financial standing. You might be able to pay for all the requirements before and after the bankruptcy but you might be covered in another set of credits after everything is done.
- Bankruptcy Helps in Weakening the Negative Effects on Your Credit In The Long Run – The filing of bankruptcy will most likely hurt your credit score the moment you file for one. This might also have adverse effects with how you plan and restructure your current financial well-being. But this result is only temporary as it may also become a way to rebuild your credit score over time. The record of the filing for bankruptcy may affect your credit score value as it can be seen in your credit report but its influence may decrease as time passes by. You may gradually see how bankruptcy will slowly restore your good credit. This transition will only require time before your credit will be back on the right track. This is primarily because you are no longer in a difficult state of satisfying your financial responsibilities since you do not owe numerous debts anymore. As a result, your credit utilization rate will be enhanced. You just have to wait until your record of bankruptcy will be removed from your credit history because by that time, your credit will be restructured again. However, you have to endure the 10-year period of low credit score value until it will gradually bring to a sound financial status – this is certainly something that is worth waiting for!
These are few things that may happen when you file for bankruptcy. This situation is usually regarded as a desperate move when the need arises and when you’re in a washed up situation. But the negative effects of this financial move can be lessened by knowing how to restore credit. Rebuilding your credit is one of the best options to take after a tremendous financial downfall for several months. Filing of bankruptcy may lead you to re-establishment of new credit accounts after the lapse of ten years. By that time, it is suggested that you design and plan your credits well to avoid the dilemma of having to file for bankruptcy again. For instance, paying off your financial duties on-time and having the money saved to do so each month may eventually increase your credit score. This is the essence of constructing a positive payment record and providing an optimistic information in your credit report. As soon as you have gotten your new line of credits, make sure to create a progress plan so that you’ll be able to see and evaluate your credit performance. With this, you may prevent yourself from getting into monetary problems which will spiral over time.