How Does Bankruptcy Affect a Credit Score?
A credit score typically takes into account four main factors, all of which are affected by bankruptcy. If you are planning on declaring bankruptcy, you should contact the Boca Raton bankruptcy lawyer, Eric N. Klein & Associates, P.C. today at 561-353-2800 to learn the best course of action for your individual circumstance.
Understanding the “Four C’s”
The four factors which are typically taken into account when considering a credit score are Capacity, Capital, Collateral, and Character.
- Capacity: Your debt to income ratio is actually improved by bankruptcy because you have decreased the amount of debt you owe.
- Collateral: Depending on what type of bankruptcy you declare, your available collateral may decrease. However, you may still be able to gain a secured credit card or vehicle loan after a bankruptcy.
- Capital: A creditor is interested in the assets you have available to repay your loans. Your overall level of wealth may also be decreased, depending on the type of bankruptcy you declare.
- Character: Bankruptcy most significantly affects your character, as lenders may be wary of extending credit to someone who has declared bankruptcy. Careful financial planning, debt management and the slow and steady building of assets can help rebuild your credit and reputation.
Contact Us
If you are planning on declaring bankruptcy or are looking for information on the credit scoring process, contact the Boca Raton bankruptcy attorney, Eric N. Klein & Associates, P.C. today at 561-353-2800. We will review your financial situation and recommend an appropriate course of action.
