When you are drowning in a sea of debt, it is difficult to decide whether bad credit or filing bankruptcy is worse. They each have their downsides, but they each also have their upsides. In the end, it really comes down to what your goals are and how much potential you have to meet those goals in your current situation.
Obviously, you want to meet those goals as soon as possible. Because of this, you may need to make a choice between trying to fix your credit on your own and filing bankruptcy as soon as possible.
The Effects of a Decreasing Credit Score
The thing about bad credit is that even if you are making all of the payments you can, it may not help your credit score. This is because you may not be able to make full payments. Even if you can, those payments may not be doing much to reduce the principal of your balance. Meanwhile, the interest just keeps adding up—sometimes faster than your payments can keep up with.
As a result, your credit score might decline more and more each month. Read more about how much bad credit can cost you here (http://www.zerodownbankruptcy.com/bankruptcy-news/money-management/how-much-can-bad-credit-actually-cost-you/).
By contrast, bankruptcy only affects your credit score once. It is a serious hit to be sure, but it does not continue to damage your score every month. If anything, it allows you to start raising your credit score because you can now afford to make regular payments on the accounts you still have open.
Weighing Your Credit Options
When you have bad credit, you have very few credit options. Most lenders won’t want to lend to you because you are unable to make current payments, so they assume you won’t be able to make future payments as well. This is true even when it comes to debt consolidation loans. Even though most people look to debt consolidation as a means by which to make it easier to make or reduce payments, you still have to have good credit to qualify.
By contrast, the discharge of a bankruptcy can actually increase your credit options. This is because lenders know you are unable to file bankruptcy again in the near future, so you will have to pay the bill. On top of that, they can see that you now have limited debt, so you are not going to be overwhelmed by yet another monthly payment. For more information on Chapter 7, click here (http://www.zerodownbankruptcy.com/chapter-7/).
Starting Over and Moving Forward
Building your credit is a slow and sometimes painful process. When you have bad credit, it seems to take forever. While no one wants to file bankruptcy, it is sometimes the shortest route to success. In either case, the only loans you will be able to get will be high-interest loans. However, you are probably more likely to get credit offers after bankruptcy than you are with bad credit, so you have the chance to build your credit faster. Because you are building your credit after bankruptcy without a lot of existing debt, you can keep your accounts paid off so that creditors can see that your financial past does not completely define your current financial methods.
Share this information online with friends and family members who may be considering bankruptcy.
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