Bankruptcy Fear #3
I heard bankruptcy will ruin my credit.
Ask yourself this one hard question: “With the debt you have now, do you really have “credit” ? “
Would any new lender seriously give you more credit to get yourself deeper in debt?
Most people mistakenly believe that their credit and their credit report are the same thing.
This is completely wrong.
Your credit is your ability to borrow money, while your credit report is a summary of your payment and credit history. Although you may have perfect payment history, if you currently have more bills than you can afford, you have no credit because no one will loan you any more money. Many people discover this when they apply for a consolidation loan.
You see, your credit record is a snapshot of your income and debts at any one time. So as long as you owe money, that old debt is dragging down whatever “credit” you have and keeping you from moving forward in life.
But after bankruptcy, most, if not all, of that old debt is gone. A new lender doesn’t have to compete with the old lenders in your past life for any payments and you’re a lot more attractive borrower if you have no other debts and you will be a better credit risk to creditors because you will be able to afford the payments on new debt.
It’s possible to rebuild your credit within just a few months of filing bankruptcy. In many cases, people report having an easier time obtaining credit after the bankruptcy freed them from so much debt.