When you apply for credit, lenders review your credit rating to help them make a decision. If you are too high a risk, they will turn you down as they do not want to lose their money.
Yet, someone who always makes payments on time is not that attractive either. A lender’s ideal is someone who will pay them back the money, but with some added interest on top.
A previous bankruptcy is a signal you are high risk. You failed to pay someone once and may do it again. That does not, however, mean you do not have the potential to make the bank money in the future.
Chapter 7 remains on your credit record longer than Chapter 13
A Chapter 7 filing will show on your credit report and restrict your ability to get credit for 10 years, a Chapter 13 for seven. Some people think this is a major reason to opt for Chapter 13. Yet if you do not complete your Chapter 13 and then resort to Chapter 7, you will damage your credit report even more and for longer.
You can start rebuilding your credit score immediately
Credit scores are a bit like the game. However high you sit on the credit score ladder, bankruptcy will send you back down to the bottom. Yet, going to the bottom does not mean the game is over. You can start to build your score back up using tools such as secured credit cards and credit-builder loans. Your score will, however, drop back down if you encounter further financial problems.
Filing for personal bankruptcy is a tough decision to make. Learning more about the process, benefits and consequences will be crucial to making the correct choice.