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Credit scores and the fresh start of bankruptcy, Part 2

Yesterday, this blog began a discussion on credit card use and credit scores. The average consumer in the United States that uses some form of payment card, such as credit cards, debit cards and prepaid cards holds a total of 3.7 cards, according to the Federal Reserve. It only stands to reason that some consumers have a higher than average number of open credit card accounts. The higher the number of cards a consumer holds may allow for some flexibility in managing debt if a crisis arises.

Similarly, increasing the number of cards may tempt a financially distressed consumer to use one credit card to pay down the amount owed on another. But over time, this process can actually land the consumer in even more financial distress. For some Ohio residents who have faced an emergency situation leading them into financial distress, bankruptcy may be a better option to relieve the distress than trying to maintain the cycle of increasing overall debt.

The original emergency situation-which can arise from an unexpected medical debt, car troubles or the sudden loss of a job-can be made even more frustrating due to the increased financial distress. Creditors may begin the harassing phone calls and letters.

It is important to remember that once financial distress sets in the credit score may already be affected by the various factors credit reporting companies use in creating a credit score. Often, people in financial distress are concerned about their score and try to avoid considering the fresh start that filing for bankruptcy can provide.

Many consumers are aware that bankruptcy does impact their credit report. It is an important concept to discuss with an experienced Cincinnati bankruptcy attorney. But for some financially distressed consumers, the fresh start offered through bankruptcy may provide the starting point to begin rebuilding their credit.

Source: San Francisco Chronicle, "How Many Credit Cards Should You Have?," Amy Fontinelle 18 Jul 2011

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