Credit scores determine so many financial avenues, from interest rates to access to buying a home. Knowing about the long-term effects of bankruptcy on your credit score may help you decide whether bankruptcy is right for you. Exploring how much credit scores are impacted by bankruptcy, how long these effects are, and options around this can also be helpful. Do not hesitate to ask a Chattanooga bankruptcy lawyer about bankruptcy to learn more.
Why Do Credit Scores Matter?
Many people wonder why credit scores are such a big deal. The reality is that credit scores can impact a multitude of financial decisions, resources, and options. This is because credit scores are used to determine how much of a financial risk you will be in any kind of financial agreement.
What this translates to is lower credit scores being interpreted as bad and higher credit scores being viewed as a sign of financial trustworthiness. The lower your credit score, the less likely you will be offered credit cards, personal loans, car loans, and home mortgages. Not only that, but certain insurance companies and phone companies may not always sell their services, depending on how low a credit score is.
Since lower credit scores are tied to greater financial risk for many companies, this means they will make you pay more. What this means is higher interest rates, higher monthly payments, and fewer discounts. This also means fewer financial options overall.
Long-Term Effects of Bankruptcy on Credit Scores
When thinking about bankruptcy, the first downside that comes into mind for many people is how bankruptcy impacts credit scores. The effects of bankruptcy on credit scores can seem severe at first. Not only can bankruptcy lower a credit score by 200 to 240 points, but the effects of bankruptcy on your score can last from 7 to ten years.
You might be wondering if bankruptcy is worth these long-term effects on your credit score. However, what not everyone realizes is how much their credit score could be affected if they do not file for bankruptcy. This is because credit or FICO scores are also based on any negative financial feedback.
In other words, dealing with financial problems with greater effects than bankruptcy can cause more harm to your credit score than bankruptcy. There are rare cases like this where filing for bankruptcy can boost a credit score by up to 50 points. Looking at the pros and cons of bankruptcy related to credit scores can help you navigate this.
For people in severe debt, bankruptcy can discharge delinquent debts on your credit report. This means the outstanding balances will be reduced to zero. In this way, bankruptcy may make it easier to rebuild damaged credit scores.
Call Tom Bible Law for Legal Help
Deciding to file for bankruptcy can be intimidating. Feel free to call us at Tom Bible Law today at (423) 424-3116 for a consultation about your options related to bankruptcy. Our dedicated team of Tennessee bankruptcy attorneys is ready to guide you through various bankruptcy options based on your unique financial circumstances. We can be found in the Tennessee cities of Chattanooga, Kingsport, and Tullahoma.