Credit After Foreclosure and Bankruptcy
A foreclosure or repossession will often have a greater impact on your credit score than bankruptcy. Although bankruptcy may decrease a good score 100 -150 points bankruptcy will often allow a credit score to increase over time after discharge. A foreclosure will prevent you from financing a home for 3 years but a bankruptcy will only prevent you from financing a home for 2 years. Long after a repossession you may only be offered autos if you have a large down payment or at high rates. However most people will be able to finance an auto within a year after they obtain a discharge if they retain a car and/or home and make those payments on time.
The basis for granting credit tends to remain being able to show that you have at least a short term history of making payments on time after filing bankruptcy plus the ability to repay and in the case of larger purchases such as a home or car the security you offer to guarantee repayment. Most people that file bankruptcy can buy a car within a year and a home within 2 years after discharge. If you are being required to furnish a cosigner it means the loan company has no confidence that you will repay.
Often you are better off filing bankruptcy than paying a debt collector. It is rarely good advice to mortgage a home or cash in your retirement to pay a debt. This is just stealing from your children and retirement. I have never advised someone to pay a collection account. An increase in balance for a collection item normally won’t cause your credit score to decrease further, since remains a collection listing. Disappointingly, paying down or paying off a collection little or no scoring impact at all. For example, paying off an installment loan almost never helps a score, while paying down revolving credit card debt almost always will. Similarly, paying off a debt that was previously listed as severely negative, even if charged off by the original creditor, will also likely have no positive impact. If you are considering paying off a collection account think again. It is rare that a bill collector will sue to collect and after they have reported a collection item they have done all of the damage they can do. Only person that owns the debt can sue you and the debt collection agency or servicer never owns the debt. Often these debt collectors will intentionally lie to collect. If they do and you can prove it you have a fair debt collection practices case.