How Bankruptcy Affects Credit Score

If you have been struggling with debt, you may have considered declaring bankruptcy and are concerned because you are afraid of the damage a bankruptcy has on your credit score. A bankruptcy will have a serious impact on your score. Depending on how you maintain your credit after declaring bankruptcy, you may be able to bounce back after all.

The Initial Effect On Your Score

When you declare bankruptcy, you are essentially declaring your inability to pay your creditors. Since your credit score measures how well you pay your debts, your score will suffer at first, dropping as many as 100 points. Your bankruptcy also stays on your credit record for several years, discouraging many lenders from extending you lines of credit without charging high interest rates.

How Your Score Can Recover

However, a bankruptcy also cancels many of your old debts, which means you may finally have enough money to pay off any debts not covered in your bankruptcy settlement. You can also take on one small line of credit, perhaps a single credit card. While repairing your credit after bankruptcy will take a while, making responsible choices after your bankruptcy will bring your score back up.

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