Bankruptcy doesn’t have to be something that scares you. It’s designed to help you get out of debt and to minimize the impact of those debts on your life.
Still, there are some things you have to consider. One of the issues that could be holding you back from bankruptcy is how your credit score will be impacted. It’s true that your credit score may drop if you decide to go through bankruptcy, but that isn’t always the case.
If you have a good credit score, around 700, then yes, bankruptcy can send it spiraling downward to around 500. Lower scores, perhaps around 670 or 650, could drop less, in comparison. While that might seem like a shock, you should remember that many people who are in a position to consider bankruptcy may already be struggling with missed payments. Those missed payments may be reported and may have dropped your score significantly even before bankruptcy. Either way, a credit score can be rebuilt over time.
After bankruptcy, the bankruptcy will remain on your credit report for between seven and 10 years. That doesn’t mean that you can’t work on improving your credit score, though. You can start taking steps to improve your score immediately by:
- Establishing new credit lines, even if they are secured with a down payment
- Paying your utility bills on time
- Taking on debt only if you can pay it off within the month
You can follow your credit score to make sure that the steps you’re taking are resulting in improvements in your score, too. Within a relatively short time frame, you should start to see your score recovering.