A common worry that individuals have when thinking about bankruptcy is how will it affect their credit score. Many individuals considering bankruptcy will also consider debt settlement or debt consolidation as a way out of debt. The question is which is better or worse for your credit score?

Chapter 7 bankruptcy takes on average 95 days from filing to discharge. Immediately after discharge individuals can begin to rebuild credit. Think about drawing a line in the sand. Prior to filing most individuals have credit scores of 500 to 600, which is low. Filing bankruptcy will not lower the score much more although it will be listed on a credit score. Once a discharge is received individuals will often receive credit card offers and extensions of credit. The reason is individual with income suddenly become debt free, therefore their debt to income ratio looks better. Creditors also know that an individual can not file another chapter 7 for eight years, their chance of being paid is high. Through responsible credit use, including charging only what you can afford and paying the balance in full and on time every month, as well as paying mortgage and car payments timely, credit scores will climb.

Debt consolidation or debt settlement will often take years to complete. The lengthy process will mean that the low credit scores of 500 to 600 will remain low until the debt is satisfied. Beyond the length many creditors will report settled in full or compromise in full as a designation on the credit report. Such designation are viewed as a negative.

The best thing to do when considering the affect that any process will have on your credit score is to know your options.