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Filing for bankruptcy will not always hurt your credit score. One of the factors that a credit score takes into account is the debt-to-income ratio. If you have a lot of debt and little income, this ratio will impact your score in a negative way. However, once you file bankruptcy, your debt will be very little to none at all, which will increase this portion of your credit score.
Thus, while a bankruptcy will stay on your credit report for seven to ten years, a bankruptcy may actually help your credit score once a bankruptcy is filed since those who file may have a very low score to begin with. Therefore, the debt-to-income ratio and other such factors that improve after a bankruptcy is filing may actually help to improve your credit score after you file bankruptcy.
Posted by Marina Ricci on 21 Jan 2010
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