How Long Does Bankruptcy Stay On Your Credit Report?
A Chapter 7 Bankruptcy filing will stay on your credit report for 10 Years.
Credit scores are based on the information contained in a person’s credit report; therefore, people are always concerned with how bankruptcy will affect their credit score. Bankruptcy filings are reflected on the person’s credit report; however, by the time many people come into the office to discuss filing bankruptcy, their credit score has already been damaged due to late payments, collectors and other negative marks. As people struggle to pay their bills and find a way out of a debt problem, their credit score suffers. By the time they decide to file bankruptcy, the damage is already done.
Filing Bankruptcy and Your Credit Score
When you file a bankruptcy case, the filing will be reflected on your credit report. A Chapter 7 bankruptcy case remains on your credit report for 10 years while a Chapter 13 bankruptcy case is only reflected on your credit report for 7 years. It is true that filing bankruptcy typically results in a temporary decrease in your credit score; however, the decrease is not permanent. Most debtors see a slight increase in their credit score within a year after the bankruptcy case is complete and with good credit habits, their credit score continues to improve. In fact, filing a bankruptcy is a debt solution that increases your credit score over time compared to other debt solutions.
For example, filing bankruptcy results in discharged debts being reported with a zero balance on your credit report. While the creditor will note the debt was discharged through bankruptcy, the amount owed is zero and the creditor no longer reports payments as being late. As time passes, the negative impact of a discharged account decreases and the credit score improves.
On the other hand, if you work with a debt consolidation company, creditors are not required to work with you to resolve debts; therefore, creditors who choose not to accept your proposed terms will continue to report late payments each month. Even though you may be working with some creditors, the creditors who refuse to work with you are still reporting information to the credit reporting agencies. This continues to damage and lower your credit score. A bankruptcy filing requires all creditors to accept the terms of the bankruptcy discharge so that you can get a fresh start.
Doing nothing damages your credit rating more than a bankruptcy filing. Ignoring debt problems will only result in additional negative marks on your credit report such as foreclosures, repossessions and collection lawsuits.
Tips for Rebuilding Credit After Bankruptcy
The most important thing you can do to improve your credit score after bankruptcy is to make all remaining debt payments on time. Your credit history, including late payments, comprises 35% of your credit score. Late payments remain on your credit history up to 36 months or longer and lower your credit score very quickly. As you begin making your car payment, house payment and other secured debt payments on time each month, your credit score will begin to improve.
After your bankruptcy case is closed, apply for a secured credit card. You will be required to deposit an amount equal to your credit limit with the lender to secure your credit charges. Before applying for a secured credit card, verify that the lender reports your payments to the credit reporting agencies. As you use the secured credit card and make timely payments on the account, you will be improving your overall credit history.
Once your credit rating begins to improve, you can consider applying for a small personal loan provided you can easily afford the monthly payments. This will give you a better mixture of the various types of debts, which is a factor used to calculate your credit score. Only do this if you know you can make timely payments on the account and pay off the entire account. The same applies to a car loan. If you do not have a car loan, applying for a small car loan and making on-time payments will help rebuild your credit score.
Only time and on-time payments will improve your credit score. Beware of companies or individuals who claim they can increase your credit score very quickly. These offers are usually fraudulently and designed to get money from you without offering you any real assistance. By making on-time payments and using credit wisely, your credit score will improve within a few years following your bankruptcy filing even though the bankruptcy may be reflected on your credit report for several more years.
Contact an Experienced Bankruptcy Attorney
If you are dealing with overwhelming financial problems and harassing debt collectors, contact Weston Legal, PLLC to discuss your bankruptcy options. We will help you find the best solution to solve your debt problems.