The Top 3 Ways Bankruptcy Can Improve Your Credit (Not Kidding)

 

 

I hear people say all the time, “won’t bankruptcy ruin my credit for 7 years?” Well first of all, a bankruptcy stays on your credit report for 10 years. But more importantly, while a bankruptcy is certainly not good for your credit rating, it actually improves the factor that we are really concerned about and that is a willingness of a creditor to lend you money.

Bankruptcy is preferable to multiple late fees   By the time most folks are thinking about bankruptcy, they already have multiple late-pays on their credit report of 30, 60, and 90 or more days late in some cases. Each one of these leaves its own bad mark on your credit report, making it less and less likely that a lender will want to loan you additional money.     Bankruptcy is one point in time and hurts you less than late after late after late.
Bankruptcy wipes out old debts   If you had money to lend, would you rather lend it to someone who already had 20 thousand dollars in debt, or someone who had little or no debt?   The answer is obvious.   Personally I would rather be someone’s only creditor than one of many creditors. Once you obtain your discharge, you will be free of most or all of your debt. Anyone lending you money now becomes the priority instead of getting lost in the crowd. Many people are shocked at how quickly they start receiving credit card offers in the mail shortly after bankruptcy. I don’t recommend you sign up, but it proves the point.
Creditors are safe from the fear of a bankruptcy filing for the next 8 years   The bigger your debt, the larger the threat of bankruptcy looms for potential lenders. Once you obtain your discharge, however, potential lenders are safe for at least 8 years because you cannot file for bankruptcy again until that time. So the recently bankrupt become a very good risk for creditors. This is yet one more reason that you may receive multiple credit cards offers shortly after your discharge.

Keep in mind that I am not claiming that your credit score will improve, only that lenders will be more willing to lend to you after bankruptcy. Of course, the interest rates that you are offered may not be the best. However, if your credit is the measure of the willingness of lender to lend to you, then bankruptcy can improve your credit in many cases.

Filing bankruptcy is not what ruins your credit, not paying bills on time ruins your credit. Want to rebuild your credit? Simple. Pay your bills on time.