Understanding how bankruptcy affects your credit score in Ohio is an important aspect to consider before filing for bankruptcy. After all, this is something that can have a long-term impact on your life, so you want to be prepared beforehand.
Are you worried about how long bankruptcy will stay on your credit score in Ohio? If so, check out this article, where we will be discussing credit reports after Chapter 7 and Chapter 13, and the steps you can take to rebuild credit after bankruptcy.
Impact of Bankruptcy on Credit Report
Bankruptcy will impact your credit score in Ohio differently depending on the type of bankruptcy you file for. The two most common options are Chapter 7 bankruptcy and Chapter 13 bankruptcy.
Chapter 7 bankruptcy is a very common option for those with a lower income and can be completed in just a few months. However, even though Chapter 7 bankruptcy can be completed quickly, it will stay on your credit report for 10 years from the date that you filed.
On the other hand, Chapter 13 bankruptcy allows you to create a repayment plan to address the bulk of your debt. This is an option for those who have too high an income to qualify for Chapter 7 bankruptcy. The average Chapter 13 repayment plan is 3 to 5 years, but it will only remain on your credit report for seven years from the date that you filed.
To understand more about how bankruptcy affects your credit score in Ohio, you need to speak with a bankruptcy attorney. An attorney will be able to instruct you on what to expect and how you can move forward once you have a bankruptcy on your credit report.
Immediate Impact on Credit Score
Once you file for bankruptcy, this will be reflected on your credit report within one to two months. You will also see an immediate impact on your credit score once you have been approved for bankruptcy.
A significant credit score drop is very common, but this is completely dependent on where your credit score was originally. On average, an individual with a fair or low credit score will lose between 130 and 150 points after filing for bankruptcy. But it isn’t uncommon to see up to 250 points knocked off your credit score if it was high.
You should also be prepared to be labeled as a risky borrower, which will make it difficult, if not impossible, to get approved for loans or unsecured credit. If you are approved for different types of loans or credit, you will have to face much steeper interest rates.
Rebuilding Your Credit After Bankruptcy
Rebuilding credit after bankruptcy is a process, but it is entirely possible to do so in a relatively short amount of time. In fact, you may be able to qualify for a new credit within one to two years after filing for bankruptcy if you use the right strategies to rebuild your credit. Many people also achieve mortgage eligibility within 2 to 4 years of filing for bankruptcy.
So, if you want to start recovering after your bankruptcy and rebuilding your credit, here are some ways you can go about doing this.
Become an Authorized User
One of the best ways to start rebuilding your credit score after filing for bankruptcy is by becoming an authorized user. This allows you to become an authorized user on someone else’s credit card as a way of rebuilding a positive credit score.
Although this can be a good way of rebuilding credit, you need to be extremely cautious when becoming an authorized user. If the primary holder of the credit card isn’t able to maintain monthly payments, this could actually damage your score even further.
Get a Secured Credit Card
Another option that can help you start rebuilding your credit score is to get a secured credit card. Secured credit cards require you to put down a cash deposit, which will act as your borrowing limit. This allows you to build your credit score like you would with a traditional credit card without as much of a risk.
Even though a secured credit card is safer than a traditional credit card, you should still only use this option once you have financial stability and can maintain the monthly payments.
Maintain Monthly Payments
Speaking of monthly payments, the best way to rebuild your credit long-term is to simply keep up on your financial responsibilities. Make sure you handle all of your monthly payments on time so that you don’t have any missed or late payments. Keeping up on your monthly payments will help to establish long-term patterns of financial stability.
FAQ Section
Will bankruptcy ruin my credit forever?
No, bankruptcy will drop off your credit report after 7 to 10 years, giving you a clean slate. There are also many strategies you can use to rebuild your credit score after going through bankruptcy.
When can I apply for a mortgage after bankruptcy?
Most people become mortgage eligible between two and four years after filing for bankruptcy, depending on their unique circumstances. If you file for Chapter 13 bankruptcy, you can also refinance before discharge as long as you can show at least one year of making payments on time.
Can I remove bankruptcy from my credit report early?
No, as long as the record of bankruptcy is accurate, it cannot be removed from your credit report until it reaches the expiration date.
How do I rebuild my credit after bankruptcy?
Keep up on your monthly financial responsibilities, borrow wisely, and become an authorized user on somebody else’s credit card. Also, make sure you pay all of your monthly bills on time without missing any payments.
Hire a Family Law Attorney in Ohio
If you are worried about the impact of bankruptcy on your credit score in Ohio, you are probably ready to file for bankruptcy. Richard P. Arthur, Attorney at Law, has extensive experience handling bankruptcy cases in Ohio and can help you understand how this will impact your credit score. To proceed with your bankruptcy case, contact us today at 937-254-3738 for a free consultation.