The Importance of Good Credit in the U.S. and How Bankruptcy Can Help

Simply put, good credit is necessary in the United States. No, it doesn’t just help you obtain a credit card, it also provides the footing required to purchase a new home, start a business or even get a job. While you can still manage to survive with bad credit, banks may not be willing to loan you money and, if they do, they’ll be extremely high interest—costing you dearly in the long run.

Fortunately, bankruptcy may provide the relief you need to clear your debt and let you start rebuilding your credit.

Importance of Good Credit

First, let’s talk about why having a good credit score is important in the United States:

• Buying a House – Purchasing your first house is difficult to do without a good credit score. Although the housing market has rebounded since the recession, banks are still cautious about lending to those with bad credit.
• Purchasing a Car – A car is typically easier to buy than a home, but a bad credit score may leave you with a high interest rate and a large down payment that will cost you more than you want to pay.
• Starting a Business – A good credit score is necessary for a business loan.
• Getting a Job – Employers look at background checks before hiring, which may include your credit score. A bad score could keep you from being hired.
• Insurance – Vehicle insurance, life insurance and home insurance may ruin your credit. Bad credit scores can cause much higher insurance payments.
• Getting a Loan with a Low Interest Rate – Many banks will give you a loan regardless of your credit score, but they come with a high interest rate. A good credit score will ensure you get a lower interest rate.

How Bankruptcy Can Help

The main issue that discourages people from filing for bankruptcy is the effect it will have on credit. Bankruptcy will undoubtedly damage your credit, but how much? If your credit score is high, the impact will be severe, but if you’re inundated by debt and your credit is already poor, filing for bankruptcy will not damage your score as much.

Depending on the type of bankruptcy you file for, you may be able to discharge the majority, if not all, of your debt. That includes credit card debt, medical bills, personal loans, foreclosure balances, car accident claims, unpaid rent and utility bills and collection agency accounts.

Once you have filed for bankruptcy and are clear of debt, you can begin rebuilding your credit. While a bankruptcy may stay on your record anywhere from 7 to 10 years, the average consumer is able to seek normal credit after just two years of bankruptcy, with the chance of purchasing a home. You can do that by applying for a secured credit card, opening an installment account and making all your payments on time.

Contact Our Chicago Consumer Lawyers

If you’re stuck with large amounts of debt and a bad credit score, our Chicago bankruptcy attorneys can help. Recovering from a bankruptcy is a difficult process, but if you enlist our help, we can provide the legal guidance necessary to get you back on your feet and on the road to good credit.