If you are considering filing for bankruptcy during these uncertain times, you are not alone. You may be wondering about the long-term impact of filing for bankruptcy. You probably are aware that filing for bankruptcy will impact your credit score. Perhaps your concern that your credit score will drop is keeping you from filing for bankruptcy. We will discuss how much filing for bankruptcy can drop your credit score below.
How Does Filing for Bankruptcy Affect Your Credit Score?
Three major credit bureaus report your credit score. These credit bureaus track all of your credit activity. Anytime you take out debt, it will affect your credit score. Your credit cards, mortgages, auto loans, student loans, and more will be reflected in your overall credit score. Your credit score will range from 280 to 850, with 850 being the best score possible,
Gaming the credit reporting system is impossible because the formula credit bureaus used to calculate someone’s score is proprietary and secret. As a result, it is impossible to game the system. If you do file for bankruptcy, it will affect your credit score because filing for bankruptcy and other events gives you “damage points.”
Filing for Bankruptcy and Your Credit Score
The higher your starting credit score, the more points you lose when you file for bankruptcy. Suppose you have a credit score of 675. Filing for bankruptcy will typically lower your credit score by 130 to 150 points. However, if you have a score of 780, filing for bankruptcy could cost you between 220 and 240 points. The lower your credit score before you file for bankruptcy, the fewer points you will lose.
How much will filing for bankruptcy decrease your score? The answer is, it depends on where your score started. Many people who filed for bankruptcy have been struggling with making payments for a while. They may have accounts in default, wage garnishment, accounts in collection, or other types of adverse credit events. As a result, their credit score when they file for bankruptcy is usually somewhat low. When this is the case, filing for bankruptcy may not have a tremendous impact on their credit score at all.
Should I File for Bankruptcy?
If you are already struggling to pay your bills, it is probably already reflected in your credit score. For example, making late payments on credit cards or maxing them out will cause you damage points. Likewise, repossession and foreclosure will cause your score to drop. Filing for bankruptcy will decrease your credit score, but it will also allow you a way to start rebuilding your financial track record. Eventually, you will be able to increase your credit score.
Contact a San Diego Bankruptcy Lawyer
Are you trying to decide whether filing for bankruptcy is worth it? If so, you need the help of an experienced bankruptcy lawyer who will carefully listen to your case and provide you with strategic legal advice. Contact Bankruptcy Law Center today to schedule your initial consultation to discuss your case.