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Bankruptcy's Impact On Credit Score

Bankruptcy’s Impact on Credit Scores

Today, we will explain bankruptcy’s impact on credit scores. In truth, no one knows just how a bankruptcy will affect your credit score. There are five distinct factors considered while determining your credit score. How your FICO or credit score is determined is a closely guarded secret. However, we are aware that filing for bankruptcy will negatively affect your credit. The magnitude of this effect will vary based on your credit score and credit history before declaring bankruptcy.

If you have a very decent credit score at the time you file for bankruptcy, you may expect a 100-point decrease, according to our experience working directly with customers. Again, this will vary from person to person. Additionally, if you have a lower credit score, the reduction will often be smaller.

Even though declaring bankruptcy would negatively impact your credit score, ignoring your debts may also lengthen the path to low credit. The idea is that, if you think you cannot recover from your debt, filing for bankruptcy may initially harm your credit, but it will allow you to begin the process of rebuilding your credit. In contrast, if you do not file for bankruptcy and continue to pay minimums on your bills, your credit will remain mediocre and you will spend a ton of money on interest, late fees, and penalties. Obviously, being late on your monthly payments can also lower your credit score.

To understand bankruptcy’s impact on credit scores, the best course of action is to discuss your circumstances with an experienced bankruptcy attorney. A seasoned attorney can explain the procedure and assist you in determining if filing for bankruptcy makes sense given your circumstances. Please contact Hoard Law with further assistance on this topic.