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Whether you want to buy a new car, purchase a home or even set up a cellphone plan, you likely need to have decent credit. If you struggle to pay your bills, though, your credit score may not be as high as you would like. You may also worry about ever having the financial means to improve your creditworthiness. 

Credit reporting bureaus use a variety of factors to calculate your credit score. If you have a poor debt-to-income ratio or have missed payments, you may not have sufficient credit to provide for yourself and your family. While a bankruptcy filing may cause an immediate drop in your creditworthiness, it may also lead to an eventual improvement of your credit score. 

Bettering your debt-to-income ratio 

Before extending credit, creditors typically check to see whether you have the financial means to pay back what you borrow. Your debt-to-income ratio compares the amount you owe with your income. If you have too much debt relative to your income, you may have a low credit score. A bankruptcy filing may allow you to deal with your debt proactively. That is, if your income remains consistent while your debt falls, your credit score may gradually improve. 

Removing delinquent accounts 

Removing delinquent accounts is arguably the biggest credit-related benefit of filing for bankruptcy protection. If you are late in making payments or fail to make them altogether, your creditors may turn your account over to a collections agency. Having delinquent accounts on your credit report is an effective way to earn a bad rating. After bankruptcy, though, delinquent accounts often appear as discharged. While discharged accounts are not necessarily good for your credit, they are often better than delinquent ones. 

If you are thinking about filing for bankruptcy, you likely want to know how your filing may affect your credit. Put simply, while a bankruptcy filing may cause immediate harm to your creditworthiness, it may also contribute to an ultimate improvement. Regardless, you are apt to achieve peace of mind after gaining control over your financial situation.