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How Will Chapter 13 Bankruptcy Impact Your Credit Score?
A change in your finances will inevitably come with a wide variety of related questions. Your credit score, for example, is going to come up sooner or later.
Specifically, if you’re about to file for Chapter 13 bankruptcy, here’s what you want to know:
Defining Your Credit Score
You know that bankruptcy can negatively impact your credit score but, if you aren’t well-informed on what a credit score is, you might not know how — or for how long — it can affect you.
“A credit score is a number that reflects the information in your credit report,” the Federal Reserve explains. “The score summarizes your credit history and helps lenders predict how likely it is that you will repay a loan and make payments when they are due.”
Factors that influence your overall credit score range from the timeliness of your payments to the number of accounts you have open and more. The higher your credit score is, the more likely it is you will be granted lower interest rates.
Thus, as bankruptcy is used to overcome or eliminate certain debts you have had difficulty overcoming, it may lower your credit score for a period of time.
Factoring In Your Chapter 13 Filing
Once you know that your credit score can be impacted upon filing, it’s natural to wonder just how long that will last. To determine that, your credit report will also come into the picture.
For example, according to Experian — a major credit reporting company — “a Chapter 13 bankruptcy is removed from your report seven years from the date it is filed.” Even though the bankruptcy continues to show on your credit report for seven years, it does not mean that it continues to drag down your score. Most filers find that their credit scores start to improve very quickly after filing for bankruptcy. This is primarily due to how the bankruptcy prohibits the continued negative reporting by your creditors and your debt-to-income ratio will have improved as well.
The negative impact of filing for bankruptcy on your credit score is somewhere between one to three years for most people. Your score should show improvement as you progress through your chapter 13 plan.
“How much your credit score decreases depends on how high your score was before filing for bankruptcy,” as reported by Forbes. “If you had a good to excellent score before filing, this likely means your credit score will drop more than someone who already had a bad credit score.”
That being said, you can always be immediately proactive in terms of raising your credit score. You do not have to wait for seven years to pass in order to do so.
Diving Into Relief with Dolaghan Law
When it comes to pursuing your fresh financial start, one of the best ways to be proactive is to find a bankruptcy lawyer you can trust — and that’s where Dolaghan Law comes in!
When you work with Dolaghan Law, you’ll find the support and resources you need to navigate the filing process with confidence. Chapter 13 bankruptcy offers a fresh start, and we want to ensure you can embark on your journey with ease.
With Dolaghan Law, you’re not alone.
Are you ready to learn more or start filing? If so, contact Dolaghan Law today by calling 904-354-493