Are You Dealing With Bankruptcy And Foreclosure?

Foreclosure and bankruptcy are two words that inevitably cause emotional duress. The two words bear so much financial weight and cast anyone going through it in very negative light, typically implying that they are financially irresponsible and are unable to manage their finances properly. Given this, one tends to forget the logistical impact it has on one’s life. The two however, are not interchangeable words and understanding how each one affects your life can actually prove to be beneficial to the future of your finances.

1. Impact on your credit score

Bankruptcy, more than foreclosure, can bring down your credit score dramatically. A good credit score that’s above 600 can get pulled down 100 points in case of foreclosure; while bankruptcy can swipe 150 points off your credit score. Needless to say that the latter will significantly cripple your credit score. In some cases however, if your credit report details numerous debts, then declaring bankruptcy may actually boost your credit rating.

2. How it can affect future credit card applications

Once you file bankruptcy, all your credit card accounts and even retail credit lines are automatically closed. This of course reflects very badly on your credit statements and financial history. And should you try to apply for new credit lines and card in the future, this will reflect very badly on you. Similarly, in the case of foreclosure, lenders who know about your financial history will likewise be very wary about lending you money and will be dubious about your financial capacity to maintain credit cards.

3. Influence on your future plans.

Your credit report will bear the evidence of severely mismanaged financial after you have declared foreclosure or bankruptcy. In these cases, you will typically have to wait for three years before you can buy a new home, which will require you to take out a mortgage, as this is the minimum waiting period in these cases. Bankruptcy however will reflect on your credit reports for the next 10 years. In both cases, the two will impact your credit report and score very negatively.

Through proper planning and effort to keep your finances well managed, it is possible to bounce back after it. Be sure to check your credit reports regularly and make a habit of paying your bills promptly.