One common belief about filing for bankruptcy is that your credit score will tumble and never recover. It is easy to see how you could think that, given that if you are considering filing for bankruptcy in North Carolina, your credit score is likely already low to begin with. At Wootton & Wootton, P.C., we understand how important your credit score is to you. While bankruptcy may temporarily bring down your score, many people find that the damage is not permanent.
According to NerdWallet, your credit score is commonly considered to be poor if it is below 600. This is the threshold many lenders use when deciding if to extend credit to borrowers and how much. The best possible credit score you can have is 850.
A recent study, by a company called FICO, of people who filed for bankruptcy found that almost half of them were able to bring their credit scores to over 620 four years after their bankruptcy, and 28 percent were able to do so after only two years. The study results disproved claims from scoring experts and credit bureaus that your score will be seriously harmed if you file bankruptcy.
Furthermore, another study conducted by the Federal Reserve Bank of Philadelphia found that the average scores of people who filed for Chapter 7 bankruptcy in 2010 went up by approximately 80 points after their bankruptcy cases were discharged. Since 538.2 was the average beginning score before bankruptcy, that important increase brought those people over the threshold of 600. Therefore, if your current credit score is under 600, you are far from alone. For more information about bankruptcy and credit, please visit our web page.