If you are in a difficult financial situation with a significant amount of debt, you may be thinking about bankruptcy and your credit score. One concern many Ohio residents have when they are considering bankruptcy is the negative impact it will have on their credit scores and credit reports.
Are you wondering how bankruptcy will impact your credit score and the possible implications of this? If so, check out this article, where we will be discussing bankruptcy, credit scores, and how you can proceed with credit rebuilding after bankruptcy in Ohio.
How Bankruptcy Impacts Your Credit Score
It is easy to understand why people worry about bankruptcy and their credit score since these things can have long-term implications. For instance, your credit score can have an impact on certain decisions, such as whether you can make a large purchase or take out a loan in the future.
It also isn’t just the immediate impact on your credit score that can be concerning. It often comes down to the fact that it can be challenging to rebuild your credit as this is often a long-term process.
You may also be wondering how many points your credit score will lose once you file for bankruptcy. There isn’t an answer for every situation, but on average, those who have a good credit score will usually see a more significant drop than those who have a lower score.
When it comes to your credit report, this can also be a significant concern for those looking to file for bankruptcy. The good news is that bankruptcy will automatically be taken off of your credit report after a certain amount of time, depending on the type of bankruptcy you file for. When you file for Chapter 7, this drops off of your report after 10 years, whereas if you file for Chapter 13, this will drop off after seven years.
Steps to Rebuild Credit After Bankruptcy
Whether you file for Chapter 13 or Chapter 7, the credit impact is something you need to be aware of. Although this isn’t always as significant as it may seem, you do want to have a strategy in place so that you can start to rebuild your credit.
However, you need to keep in mind that Chapter 7 and Chapter 13 credit repair is a long-term process, so you can’t expect to see immediate results.
If you haven’t filed for bankruptcy yet but you plan to, you need to hire an Ohio bankruptcy lawyer before proceeding. A lawyer can advise you on the best type of bankruptcy for your situation and can help you better understand how bankruptcy will impact your credit score.
Here are some steps you can take to make positive changes to your credit score after filing for bankruptcy.
Pay Bills on Time
The number one way to rebuild your credit is to pay all of your bills on time. After you file for bankruptcy, certain debts should have been eliminated, making this more accessible. It is also recommended that you automate most of your bills to ensure they are paid on time as long as you know the money will be in your account.
Create an Emergency Fund
Although creating an emergency fund may not directly relate to your credit score, it will indirectly help. This is because an emergency fund ensures you have the money you need to pay for unexpected expenses instead of relying on debt or credit.
For example, if you are short one month, you can use your emergency fund to cover your bills instead of taking out debt.
Become an Authorized User
If possible, becoming an authorized user on somebody else’s credit card is a great way of building credit. However, you should only do this if you know the person has very good financial habits and can cover the monthly payments if necessary.
If this isn’t an option, you could also consider getting a secured credit card. Secured credit cards allow you to put a security deposit on the card, which serves as your credit limit.
Get a Co-Signer
Another way to start rebuilding your credit score is to apply for a small loan. Keep in mind that it may not be possible for you to qualify for a loan on your own after filing for bankruptcy as this will be on your record.
To qualify for a small loan, you can get a co-signer who will take responsibility for making the payments if you aren’t able to. However, only take this step if you know without a doubt that you can pay the loan back.
FAQ Section
How much will my credit score drop after bankruptcy?
How much your credit score drops will depend on how many points you had to start with but it generally will drop anywhere between 130 to 200 points after you file for bankruptcy.
Can I get a loan after bankruptcy?
It isn’t impossible to get a loan after you have filed for bankruptcy, but this is dependent on your unique situation. If you do apply for a loan, it is very likely that you will face higher interest rates with poorer terms.
How soon can I start rebuilding credit?
After filing for bankruptcy, you can start to rebuild your credit immediately by making good financial decisions. In most cases, it will take at least three months before you start to see any positive progress.
Does bankruptcy remove all debt from my report?
It is very unlikely that bankruptcy will eliminate all of your debt since each type of bankruptcy has dischargeable and non-dischargeable debts. This will depend on the type of bankruptcy you file for and the type of debt you have. As a general rule, Chapter 7 bankruptcy is the better option for eliminating the largest amount of debt.
Hire a Bankruptcy Attorney in Ohio
If you need to file for divorce in Ohio, one of the first things you need to do before proceeding is to find a bankruptcy attorney. Richard P. Arthur, Attorney at Law, has extensive experience in bankruptcy cases in the state of Ohio and can help you navigate this process. To move forward with your bankruptcy case, contact us today at 937-254-3738 for a free consultation.