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Does bankruptcy affect your credit score?

On Behalf of | Dec 30, 2020 | Bankruptcy |

For some people in New Jersey, filing for bankruptcy is their last chance to relieve themselves from the burden of debt. Filing for bankruptcy can allow you to pay off your debts or get them discharged altogether so that you can start rebuilding your finances. There’s just one drawback: You’ll have to deal with the damage to your credit score.

How does bankruptcy affect your credit score?

When you file for bankruptcy, it’ll stay on your credit report for up to 10 years. Your credit score will also drop by as much as 200 points. If you had a low credit score when you filed for bankruptcy, your score might not drop as drastically. But either way, you might find it more difficult to take out a credit card or qualify for a loan.

Fortunately, the damage to your credit score doesn’t have to be permanent. You can start rebuilding your score again by applying for a credit card. If you can’t get a regular card, you can try applying for a secured credit card that requires you to make a deposit first. Once you’ve started building up your credit, you might be able to get a regular credit card.

If you get your hands on a credit card, never spend more than you’re able to pay back. You won’t be able to apply for bankruptcy again for several years, so avoid large amounts of debt as much as possible. Instead, focus on opening small lines of credit that you can pay back quickly to boost your credit score.

Is bankruptcy worth the hassle?

Filing for bankruptcy might tank your credit score, but it can also help you eliminate most of your debts. It can also prevent creditors from harassing you and help you keep most of your assets. You could talk to an attorney to learn more.