A common misconception by many people is that bankruptcy is more damaging to your credit than not filing for bankruptcy. While it is true that a bankruptcy does not look good on your credit report, neither does foreclosure, repeated late payments, and unpaid debts, all of which can have a very damaging effect on your credit. With the guidance of an experienced lawyer, within a year or two after filing for bankruptcy relief, your credit score can actually improve, sometimes substantially. Of course, each case is different and much of it depends on where your score was before you filed. The fact that many of our clients find that after they file and receive a discharge of debts, they see a substantial increase in credit score and sometimes a dramatic increase in their score.
To effectively rebuild your credit (and see your score rise), your lawyer will show you simple steps you can take, such as making all of your monthly payments on time for all new loans, new credit cards and other new debts and obligations that you acquire after bankruptcy. In addition, you should timely make all of your payments on any loans or obligations that you reaffirm through a reaffirmation agreement signed and filed in your case. (Learn more about reaffirmation agreements.) By timely making all of your payments after your case is filed and you receive a discharge of your debts, you will steadily rebuild your credit. If you begin timely making all of your monthly payments and paying your other obligations, you will begin to rebuild your credit after bankruptcy San Diego. By exercising these good credit habits and following the advice and direction of your lawyer, your score will gradually increase and can improve dramatically.
It is clearly established that you can raise your FICO score after bankruptcy, however, there is no set formula for determining how fast you will increase your FICO credit score. Some bankruptcy filers who made all of their payments on time prior to filing in order to eliminate credit card debt enjoy a 700 FICO in as little as two years after filing a Chapter 7 case, even though the fact that you file can remain on their credit report for 7 years and on the public records section of their credit report for up to 10 years. For filers who have a 500 credit score prior to filing, they will usually find that they have a 600 credit score one to two years after a Chapter 7 case, which is a significant increase in their credit score.
Some bankruptcy filers are able to obtain a new home loan as soon as 2-3 years after receiving a discharge or as soon as 1 year after beginning to make payments under a Chapter 13 Plan. By contrast, after a foreclosure, many borrowers are not able to obtain a home loan for at least 3 years. Multiple factors may determine your creditworthiness for lending purposes and different lenders may give different weight to different factors. You can conduct your own research and enhance your knowledge by going to our knowledge center, where you can find a wealth of valuable information and resources about bankruptcy.
Every individual case will be different. What is certain is that with proper legal counseling by an experienced lawyer, there is hope. There is no question that you can begin to rebuild your credit and improve your credit score and in a much shorter time than you may think. If you practice perfect credit habits, and have sufficient monthly income, you can qualify for a new home loan in as little as 2-3 years after filing bankruptcy in San Diego.