A lot of things can have a negative effect on a person’s credit score. Among these include late credit card payments, unpaid medical bills or apartment rentals, a really large debt load, and bankruptcy. During the past five years, more and more people have filed for bankruptcy, either because of the lingering recession, or because of personal financial blunders. While filing for bankruptcy may help an individual get a fresh start, it also has its share of long-term negative effects, especially on their credit score. Here’s how bankruptcy can hurt your credit score.
Why Bankruptcy Is A Tough Thing To Handle
Bankruptcy brings more than sleepless nights and bad dreams for the individual. It can also have a gloomy effect on their credit score. Whenever a person who just filed for bankruptcy applies for mortgages and loans, it puts a heavy frown on the faces of creditors and lending institutions. Insurance premiums for people who’ve experienced bankruptcy are also more costly than for people who have stable financial records. A person who’s experienced bankruptcy will also be classified as a “high-risk” customer, hence the rejection of his or her loan application. Before you file for bankruptcy, remember that bankruptcy is not an easy way out of your financial mess, because it will have serious implications on your credit record, and will also seriously hamper your business dealings with other people.
Bankruptcy Lowers Credit Scores
Whenever a person files for bankruptcy, their credit score will automatically get a 200-point deduction, and this greatly affects their chances of availing for different loans. If a person did not have a satisfacto