After bankruptcy: the many uses of credit scores

Why are credit scores so important?

The short answer is: lots of reasons. But if bankruptcy makes sense for you as a strategic way to deal with debt, the fact that it shows up on a credit report shouldn’t stop you from pursuing a consumer bankruptcy as a strategic debt relief option.

This is not only because bankruptcy – either Chapter 7 or Chapter 13 – is a viable means for many people to resolve their debts and move forward. It is also because it is possible to rebuild your credit rating over time. You can do that by making sure to pay all of your bills on time and taking other steps.

To be sure, the ways that credit scores are used in American life are many, various and important. This week, the hot news has been that asking prospective partners about their credit scores is a timely topic on the dating scene. More and people are asking would-be romantic partners the decidedly prosaic question of how good their credit his.

But dating isn’t the only arena where good credit matters. Credit scores also affect the availability of credit for buying house and how favorable an interest rate a borrower can receive. Poor credit scores can also adversely affect applications to rent apartments.

Indeed, the list of areas where credit is a factor includes many others besides dating and housing. With very poor credit, someone may not be able to get a car loan. And even if someone has a car, some insurance companies factor credit scores into the cost of car insurance.

And then there’s the realm of employment. Many employers like to consider credit scores when assessing job candidates. In fact, the practice of checking credit has become so common that eight states have passed laws that limit the ability of prospective employers to do so.

In short, there are plenty of ways, from dating to car shopping, where credit scores are important. But this doesn’t mean you should despair if yours is low. Get a plan in place to resolve your debts and then worry about steps to rebuild your credit over time.

Source: “It’s Not You, It’s Your Credit Score: 7 Ways to Improve It in 2013,” Huffington Post, Adam Levin, 12-28-12
Additional source: “Perfect 10? Never Mind That. Ask Her For Her Credit Score,” New York Times, 12-25-12

Our firm handles situations similar to those discussed in this post. To learn more about our practice, please visit our Long Island bankruptcy information page.