Foreclosure and bankruptcy can leave negative impacts on the credit report. Filing for bankruptcy may let you keep your home after the court decides about the working plans for you; but bankruptcy is not the way to do so. In homeownership crisis, there are many ways which can be thought of while deciding for a solution.
There is a need to know about the one, between foreclosure and bankruptcy, which proves better for you in the long run. Following are details informing about the long-term and short-term effects of bankruptcy and foreclosure on your credit report.
Influence on your credit score
You will have low credit score with a bankruptcy than a foreclosure. Score tagged as "good" in the range of 680 will take away 105 points in case of foreclosure. On the other hand, bankruptcy can wash away 150 points. Also, score is proportional to the damage; this implies that high score will witness washing of big scores.
Bankruptcy can badly ruin credit health, but exception lies here as well. With individuals with big amount of debt paired with poor credit score, bankruptcy could actually unite increment with the scores. With debt counting up to 30% of credit score, filing for Chapter 7 bankruptcy can get rid of the amount under debt, and the individual will credit check to realize the boosting in score.
Influence on your credit card approval
Filing for a bankruptcy means closing credit card accounts. Although those debts will be taken away from you, difficulty will play its part while applying for new credit cards. An individual would be denied a new credit card due to a spotty credit report accommodating bankruptcy and low scores. In case of foreclosure, lenders will consider the individual a defaulter, and this affects the reliability of the credit card payments.
Influence on your future plans
A foreclosure houses the credit report for seven years. If you desire owing a home again, then three is the minimum waiting period after the processing of foreclosure. On the other hand, bankruptcy is present in the credit file for ten years. You can keep your home after designing and making a payment plan with your lenders. Otherwise, with the bankruptcy mark on your report, your borrowing attempt will be failed. Lenders will not show any favors towards fresh filers of bankruptcy.
Both bankruptcy and foreclosure will equally damage your credit score, but remember that there is always hope for everything. You can still work on your credit health and budget wisely to improve your financial health.