It is often surprising to clients to learn that bankruptcy is not as bad as they always thought. Bankruptcy should rightly be thought of as a last resort, as it is not something to be taken lightly. However, often clients mistakenly believe the myth that bankruptcy will ruin your credit for 7-10 years. There is usually some truth in myths, so let us explain. The fact of the matter is that bankruptcy will typically be reported on a credit file by the credit bureaus for 7 years. There are some credit bureaus which report it up to 10 years, but whether a bankruptcy displays on your credit file or not does not necessarily indicate the strength and level of your creditworthiness. The reason for this is that credit scores and a person’s creditworthiness for a particular lender depends mainly on a two year running history. Reach out to a dallas bankruptcy lawyer for more information about specific details on bankruptcy.
Two Years of Credit History Used to Determine the Bulk of Your Creditworthiness
What that means is that once two years have passed since you filed bankruptcy, your credit score could begin to climb fairly steadily. Many bankruptcy clients also have the ability to get their credit scores to 720 within a year to two years after bankruptcy simply by paying all bills on time and being diligent and careful with managing their debt. The all important phrase “paid as agreed” or “pays as agreed” comes into play here. What that means is that if you pay your bill as agreed, then you will be given good marks by the credit bureaus. If you miss a payment for $5 or for $5,000, your credit will take a hit that is nearly identical because it will show a late payment and the late part is the part that will hit your credit.
Many people are also surprised to learn that many people have filed bankruptcy whom they never would have thought would have filed bankruptcy. People are all around us, neighbors, friends from church, social group and lifelong friends who have filed bankruptcy without us even realizing it. This is because when a person files bankruptcy, their name is not splashed across a billboard describing their financial troubles. Bankruptcy is typically a very private thing for people.