Your Bankruptcy and Credit Score
Declaring bankruptcy is a difficult and challenging decision because it comes with several repercussions and financial instability. Declaring bankruptcy will immediately have a negative effect on your credit score. However, when you are facing financial turmoil, declaring bankruptcy under Chapter 7 or Chapter 13 is a better option than continuing to accumulate debt. You will need a competent bankruptcy attorney to help you file for bankruptcy in Elgin, IL.
Your Credit Score Will Improve Over Time
As the economy fluctuates, new startups are more likely to go bankrupt as they stop acquiring more debt than they can pay off. When you file for bankruptcy, your credit score is likely to take a tumble, but most debtors have witnessed a 125 point increase sometime after the filing. Your credit history and your bankruptcy will be visible to a creditor when they request your credit report.
When you file for bankruptcy, your credit report is zero (0), meanwhile your income remains constant. This is good for your credit score as it gives bankruptcy filers the immediate chance to get a better credit score shortly after filing.
When To Get New Credit?
When you file for bankruptcy, you are more likely to be able to get more credit when your bankruptcy process is finalized and completed. On average, it takes about 4 to 5 months for the entire process to complete. Once the bankruptcy procedure is complete, you can obtain new credit cards or loans when needed. The only downside is you might be required to pay a higher Annual Percentage Rate (APR) on some items.
To avoid paying a higher APR, it’s essential to wait for at least six (6) months or a year after your bankruptcy procedure is complete. This time period will allow you to gradually improve your credit rating, so you won’t need to pay the excessive APR rates. Over time, as your credit score improves, you will be able to pay a reduced APR on different credit-based items.
Another option is to use a secure credit card to improve your credit score after filing bankruptcy. You can use a secure credit card like any other credit card, which will eventually lead up to a better credit score. It’s possible to get a good credit score by paying off reaffirmed debts, such as those secured by your property or car.
If you wish to get more information about bankruptcy and how to file for bankruptcy, you can schedule a free consultation. Contact Jackson Abdalla Law Group at (773) 550-3853 to speak with an experienced real estate & business law lawyer.