Saturday, July 4, 2009

What About My Credit Score?

It seems that many Americans are more concerned with their credit score than their net worth. I have many clients that have $50,000 or more in credit card bills that are more worried about how bankruptcy will affect their credit score than they are with getting rid of the debt. Each month they are paying $1,000.00 per month or more to pay off credit cards. They are killing themselves with worry and stress to pay this debt. They aren't working for retirement or a financial future but instead are working to pay debts.

As I have stated before, I think bankruptcy should be a last resort. There should be a plan to get out of debt before resorting to bankruptcy. But, if it is impossible to pay off the debt due to income limitations or illness, bankruptcy is a very good financial option. It is certainly better than being a slave to your debt.

How will bankruptcy affect your credit score? It will affect it between 100 and 200 points. Now, we've got that out of the way, what does it mean? Bankruptcy stays on your credit report for 7-10 years. However, once you obtain your discharge in bankruptcy, you can begin to rebuild your credit.

As you make each car payment and each mortgage payment, you are rebuilding your score. When looking at your credit score, examiners will see higher income and low debt levels (debt to income ratio) because you have just discharged your debt in bankruptcy.

While rebuilding your credit score will take time, rebuilding your life will be easier.


Tiago said...

When we speak about business it may have sense if you are just starting have a agressive advertising campaign, and for that most end accumulating debts. A friend of mine who is a top real estate agents now started in this way. I think that the biggest problem is when a family does that for their regular expenses.

Roy Bush said...

I had a buyer that wanted to buy a home in Arizona, but he had a Chapter 7 bankruptcy 7 months ago. After researching the web I found a loan program at, they allow a mortgage after a foreclosure, short sale, or bankruptcy. There is only a six month waiting period. Good to see lending options coming back.

CFS Mortgage

Laurie Ward said...

Don't let a foreclosure stop you from buying a new home. See Comstock if you have a buyer in need. They have a flexible credit loan. This program assists homeowners who have recently been through a foreclosure, short sale or have recently emerged from bankruptcy.