Credit problems are piling up due to the current recession we are experiencing nowadays. Some loses their jobs which reduces their capabilities provide for our loved ones. We often seek high interest credit accounts just to have sufficient amount of money to support our needs. We tend to just settle for the first lender who will extend us credit lines. Just before we can recollect our thoughts, we are faced with a more serious debt problem. These events made us resort to filing for bankruptcy.
Still, bankruptcy has its own set of benefits. This option can allow us to avoid losing our assets to repossession. It can prevent us from having our utilities services cut off. A bankruptcy can also put an end to harassing collection calls and activities of our creditors. And, most significantly, filing for bankruptcy can give us a fresh start. It can allow us to enjoy a life without all the stress and worries that are associated with unsettled credit.
Despite these benefits, a lot of people are still doubtful about this option. They think that having a bankruptcy in their credit report will totally damage their credit information. Others may also think that bankruptcy can eternally prevent them from receiving credit. But are these notions accurate? What is the impact of a bankruptcy in your credit report? Let us discuss the answers to these questions.
Impact of Bankruptcy on Your Credit Report
A bankruptcy court will inform the three credit report firms about its final verdict on your case. The court's decision will be reflected on your credit report. This mark will be retained in your profile for a maximum period of ten years. However, you can request credit reporting agencies to erase your bankruptcy record after seven years.
What are the reasons why people think that bankruptcy can affect their credit records in a negative way? This is because this option eliminates the credit history that people have tried to establish in the past. It can also reduce credit scores and prospects significantly. It can lower a FICO score by as much as 100 points and cause people to have a difficulty in obtaining new credit lines.
Still, it is important to note that the negative effects of bankruptcy are not permanent. After your debts have been discharged, its impact on your FICO rating also starts to dwindle. By then, you can begin working on your credit history again, for you to recover your financial health.
Life after Bankruptcy
The first thing you need to do to regain credit worthiness is to ask for your credit records. You can always contact the three credit report bureaus to give you your most recent credit file. Once you receive your report, check all the debts that have been deleted because of your bankruptcy. And review all the non-dischargeable credit you still possess. This way, you can see which accounts you still need to settle. Pay them off one by one, and you can gradually increase your credit rating.
You also have the option to open new credit accounts. You can always take a secured credit card or a personal loan. Once you get approved for any of these, you need to responsibly manage your new credit. Pay your charges in full and on-time each month. This way you can expect to have high credit scores and soon be worthy to receive low interest credit lines once again.
Copyright (c) 2010 Suzy Vanstrusen
For people who want to learn how to repair their own credit, Suzy Vanstrusen, a credit analyst and a writer of EzCreditRepairSolutions.com, has been providing consumers with tips and tricks in repairing your credit. Check the site for more free credit repair and credit report score.