Chicago Bankruptcy Attorney discusses “How will Bankruptcy Affect my Future Credit?”
One of the most frequent questions I receive is how will Bankruptcy affect my future credit? It is true that credit records are very important and getting more important every day. Many employers have started requesting credit reports, and certainly credit is necessary to purchase a house or in most cases a car. That is why I usually don’t recommend filing bankruptcy if you have good credit. If you can avoid “ruining” your credit, you certainly should! Bankruptcy will bring down the infamous FICO credit score by at least 100 points immediately…..but sometimes it can raise the FICO score by the same amount. Usually, within a year or so after the bankruptcy is over, and the Discharge is received, an individual’s credit score is better than it was than before he or she filed bankruptcy. Most people who seek out the protection of the federal bankruptcy laws are already late on their bills, which affects their credit scores. Just paying your mortgage late once can bring down that FICO score 100 points! But will you be able to obtain credit again after the bankruptcy? Certainly it helps if you pay the car and the mortgage payment on time after the bankruptcy. And don’t bounce any checks at your bank! FHA’s policy right now is to lend people money for mortgages two years after receipt of a discharge with 3.5% down payments. It is likely you will be able to purchase an automobile too, right after receiving your discharge, but you must be careful. Everyone must be careful when purchasing a car, new or used. Those salesman are expert at selling and often make us pay too much for the car, at too high an interest rate. Make them compete for your business and do your research! There is so much information available on the Web about how to purchase a car…I recommend the Consumer Union website. Many of my clients are also able to obtain a VISA and MASTERCARD after bankruptcy. These are most likely subprime lenders and you must be very careful. They charge fees just to let you have the honor of charging; they have low limits. Now is the time to read the fine print and if you do not understand, you might want to ask your bankruptcy lawyer to explain to you. Another option is the secured credit card. You open a savings account and use that as collateral to secure the credit card. My choice however, my recommendation is to stop using credit…..and to get in the habit of a debit card rather than going back to the dangers of credit cards.