A question a lot of people have when deciding if bankruptcy is an option, “What about my credit?”
My initial response is, if your credit is any good, you wouldn’t have to consider bankruptcy, because you could refinance your loans. Since that it not usually possible, it is probably best to get your financial house in order before worrying about more credit.
Bankruptcy usually does adversely affect your credit, but not in all cases. I use a service which provides credit report with your FICO at the point before filing bankruptcy and after filing bankruptcy. Sometimes, bankruptcy does improve your FICO by 30 to 40 points.
I believe that your main concern should not be about your credit post bankruptcy. If you are worried about getting credit, you are only concerned with building up your liability. I think you should be concentrating on the other side of your balance sheet, your assets. You should be building up your bank account.
That being said, I will post information re Credit and Credit Scores as I come across new and ever changing information.
JULY 15, 2010: Mortgage Loan Modification/HAMP Can Affect Your Credit Rating.
When you apply for a loan modification, your are put in a trial modification for a number of months. During this trial period the lenders report borrowers to credit bureaus according to their status BEFORE they entered modification. This could be that you are current or the number of days you are delinquent. Also, borrower’s accounts are coded to reflect they are in a partial payment.
For those who were current in their mortgage payments before entering the trial modification period, your credit score may be affected by as much as 100 points.
Personally, I am not a big Loan Modification believer. If you are accepted into a trial modification period, make sure you put you excess payments aside, and do not spend them. I have heard more than five stories, “I wasn’t accepted for my loan modification, and now the lender wants the payments I am behind.”
August 18, 2010: Debit Cards.
Debit cards do not per se affect your credit, but they do affect your balance sheet. Please read this interesting post about your “Debit Card.” Also, when using your debit card you are revealing a great deal of private information about yourself which is then sold to third party vendors.