Many people know that filing bankruptcy will negatively affect their credit score. However, many people fail to recognize that creditors use other criteria for determining their credit score. We have clients who have received credit offers within a short time after they have completed their bankruptcy. It is possible to have a higher credit score one year after completion of their Chapter 7 bankruptcy than if the person had not filed a Chapter 7 Bankruptcy at all. Filing a Chapter 7 Bankruptcy may help your credit scores in the following ways:
First, your past payment history will be gone and your credit report will show “Discharged in Bankruptcy.” In the past, this negative payment history such as non-payments and failing to pay on time have affected your credit score.
Second, if you are making payments on the items that you have elected to keep such as a house or a car, you will improve your credit score. The bankruptcy discharge will appear on your credit report for up to ten years after you are discharged. However, the fact alone may not mean that you cannot get credit.
Third, all of your eligible unsecured debt will be discharged. One of the factors that is used to figure your credit score is your debt to income ratio. Also your credit to the amount of debt that you have is also used as a factor. Therefore, after your discharge, your debt to income ration should be much improved.