Bad credit doesn't just affect those filing for bankruptcy

In the past, even the recent past, filing for bankruptcy often carried with it a certain amount of social stigma. Nowadays, though, in an economy that's tough to predict, personal bankruptcy is viewed more objectively by many people. Individual bankruptcy, whether Chapter 7 or Chapter 13, can be a powerful and strategic tool for gaining new financial footing. If utilized correctly, personal bankruptcy can help those who have few other options. In addition, it can aid individuals in learning new financial habits and freeing-up money to pay off non-dischargeable debts.

One aspect of bankruptcy that may put some Mississippi residents off the idea is the impact of bankruptcy on one's credit score. While personal bankruptcy will negatively affect one's credit score, there are many reasons why responsible, hardworking individuals might have poor credit.

One reason why fiscally responsible individuals might have a bad credit rating is because they don't understand how credit cards impact their rating. With good intentions, they limit their credit card use and use only one credit card. In some cases, paying-off one's credit card balance in full every month, which is almost always a helpful practice, can decrease what is known as "utilization," or the percent of available credit being used. It can be difficult to understand utilization and its impact on credit rating, so those considering filing for bankruptcy may want to discuss their financial situation with a local bankruptcy attorney.

Another reason responsible folks might have poor credit is not knowing what's in their report. Errors on credit reports are not uncommon, and there are several avenues for getting a mistake corrected. Still, many busy adults are simply too caught up in working and paying their bills to have time to review their report; as a result, they have bad credit without even knowing it. Finally, some who have bad credit may focus all their attention on items already in collections, and, in doing so, might neglect other accounts. When one has any account in collections, it's tempting to focus entirely on that issue. However, keeping other accounts from becoming delinquent in any way is also a key priority at this time.

Countless Americans have had to deal with the things that cause bad credit: medical expenses, unemployment, the high cost of living, college tuition and various other unexpected life changes. Fortunately, there is a way to deal with this for those who are in over their heads through no fault of their own. A Southaven bankruptcy attorney can show clients how to form a strategic plan in the midst of growing indebtedness.

Source: Forbes, "3 Reasons Responsible People Have Bad Credit Scores," Nick Clements, Sept. 10, 2015

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