A bankruptcy is a negative item. It appears as a public record on your credit report and will lower your credit score. How much it lowers your score depends upon the other credit factors present within your report.
Effects
Thirty-five percent of your FICO score reflects how well you pay your bills. A bankruptcy tells lenders that you were unable to meet your financial obligations. Once on your credit report, a bankruptcy can drop your score by 160 to 220 points, according to the Electronic Privacy Information Center.
Significance
A bankruptcy stays on your credit report for up to ten years and can devastate you credit score. A low credit score can make it hard for you to qualify for a loan and if you do qualify, it may be at a much higher interest rate.
Expert Insight
A bankruptcy can only remain on your report for a maximum of ten years, but the ramifications of it can follow you for much longer. According to financial expert Dave Ramsey, the applications of lenders and even employers may ask if you've filed for bankruptcy at any time in your life. If that answer is yes, some companies will not do business with you.
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