Protect your credit history and score before and after bankruptcy

As we mentioned earlier this week on our San Diego bankruptcy law blog, many consumers have probably kept close track of their budgets in order to cope with the difficult financial times. However, consumers may forget that they should also keep an eye on their credit report in order to make sure that they do not significantly damage their credit score in the event that they need to take out an emergency loan for an unexpected home repair or medical expense.

A low credit score can make it quite challenging for consumers to borrow loans or take out new credit cards. And when some individuals do not have an option to borrow money for an unexpected expense or while looking for a new job, they may suddenly be in a position where they cannot pay other debts on time such as a mortgage payment, car payment or credit card payment. Failing to make these payments on time will only result in further damage to one’s credit report and personal financial situation.

When individuals begin to realize that their debts may be unmanageable, they may feel ashamed and worried about not being able to repay their debts. Although filing for bankruptcy protection in the state of California may be the best solution to their financial troubles, all too often consumers think that they can skip an important payment to make up for another bill. Unfortunately, this can result in the accumulation of more debt and costly late fees, and missed payments can significantly damage one’s credit.

According to the director of consumer and public education at Experian, one of the major credit-reporting bureaus in the U.S., a 30-day late payment on one’s mortgage can result in a 60- to 110-point drop in one’s credit score. Subsequent late payments on one’s mortgage can drop one’s score by an additional 10 to 20 points and even prompt a lender to begin the foreclosure process. This significant damage can stay on one’s credit report for up to seven years. Even if a consumer only makes one payment that is more than 30 days late, it could take up to three years to repair his or her credit.

If a consumer eventually decides that Chapter 7 or Chapter 13 bankruptcy protection is the best solution to help them manage their debt once again, an already poor credit history could make it more challenging to repair one’s credit after bankruptcy. Consumers should understand that bankruptcy will affect their credit, but they can seek assistance from an experienced naperville debt help to help them develop a bankruptcy plan that best suits their financial needs while also protecting their credit as best as possible throughout the bankruptcy process.

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