How Soon Will My Credit Score Improve After Bankruptcy?

If you have filed for bankruptcy, then you’ve probably experienced the pain of the devastating Impact It had on your credit score. Bankruptcies affect people differently, with some seeing their credit score drop by as much as 200 points and others seeing their score drop by at least 150 points. The better your credit score, the bigger the Impact a bankruptcy will have on your credit score. For example, a person with a 750-credit score, may see his score drop by 200 points to 550, while a person with a 680-credit score may see his score drop by 150 points to 530. So, how long will It take your credit score to Improve after a bankruptcy? We will discuss this in much detail below.

How Soon Will My Credit Score Improve After Bankruptcy?

In the United States, if you follow good practices, your credit will begin to improve within approximately 18 to 24 months of filing for bankruptcy. That said, a bankruptcy will continue to negatively impact your credit score for as long as It remains on your credit report. As the bankruptcy ages, your credit score will begin to Improve. The biggest Increase In your credit score will occur once the bankruptcy Is removed from your credit report. A chapter 7 bankruptcy will stay on your credit report for 10 years from the date you filed for bankruptcy and a chapter 14 bankruptcy will stay on your credit report for 7 years from the date you filed for it.

That said, there is some good news. You can rebuild your credit after filing for bankruptcy fairly quickly. The more time that passes since you filed for bankruptcy the better. For example, a bankruptcy you filed 5 years ago will not hurt you as much as would a bankruptcy you filed a year ago. This is so because as the bankruptcy ages, it will have a lesser impact on your credit score.

Although you may not be able to achieve an excellent within the 700s so long as the bankruptcy remains on your credit report, you may be able to fix your credit score so that it’s within the fair range of the low to mid 600s. You may not qualify for the best credit limits or interest rates, but you will have something decent that may qualify you for a credit card or auto loan. Once the bankruptcy drops off your credit report in 7 to 10 years, you will then be able to achieve an excellent credit score provided that you’ve been borrowing and repaying responsibly since you last filed for bankruptcy.

What Does Bankruptcy Do to Your Credit?

A bankruptcy will surely cause significant damage to your credit score, however, the amount of damage It will do depends on the amount of debt that you discharged and the number of delinquent accounts that you had prior to filing for bankruptcy.

A bankruptcy can knock down your score by up to 200 points, essentially making it almost impossible to qualify for any type of unsecured credit card and things, such as auto loans and home loans. This is so because lenders see those who have filed for bankruptcy as persons who took on more debt than they were able to pay off, making it risky for them to lend you any money because they risk you defaulting on your debt obligations.

How to Improve Your Credit Score After a Bankruptcy?

Here are some step by step instructions on how to improve your credit score after filing for bankruptcy.

Check Your Credit Report

The first thing you should after having debt discharged is to pull your credit report 30 days after the discharge. Check your credit report to ensure that all of the accounts that were included in your bankruptcy are showing up with a $0 balance. If any of the accounts on your credit report are showing a balance or as not paid, you should dispute them through the credit reporting bureau reporting the inaccurate information. That said, if you find negative marks, such as late payments, don’t worry as these will remain on your credit report for 7 years from the date you filed for bankruptcy.

Apply for a Secured Credit Card

The best thing you can do to improve your credit score after having your debt discharged is to open a secured credit card and make every single payment on time. This will help you establish a good credit history starting after your bankruptcy.

Once your bankruptcy Is removed, you will have good credit history established using the secure card. This should help your credit score in the short term and long term. The only downside to opening a secured card is that your credit limit is determined by making a deposit with the bank in the amount that you want your limit to be.

Usually banks will return the security deposit to you within a year if you make all your payments on time. Once the security deposit is returned to you, your secured card will turn into an unsecured credit card.

When using your newly opened credit card, try to keep your credit utilization below 30%. For example, if your credit card has a $1000 credit limit, don’t keep a balance above $300. Keeping low credit utilization will improve your credit score. If you go above 30%, your credit score may go down.

Don’t Take on More Debt Than You Can Handle

After having your debt discharged through bankruptcy, you should take on new debt slowly, don’t chew off more than you can handle. Before you borrow money, make sure that you can afford to comfortably pay it off.

Keep some money on the side just for paying off your debt just in case an unexpected event prevents you from working and earning enough to make your payments.

Also, experts recommend that you keep a six-month window between every credit or loan application. This will keep the hard inquiries that lenders place on your credit report from hurting your credit score. Start off with a secured card and move your way up to something like a car loan. The good credit history you established using the secured card may help you obtain a decent car loan or lease.

Credit Score Planet Frequently Asked Questions

1) How long does it take to build credit after chapter 7 bankruptcy?

You can start building credit as soon as your debts are discharged. Applying for a secured credit card is a great way to begin building your credit after a chapter 7 discharge.

2) Will my credit score increase after a bankruptcy discharge?

No, you credit score will not increase after filing for bankruptcy. In the vast majority of cases, your credit score will go down significantly after filing for bankruptcy.

3) How can I improve my credit score after filing for chapter 7 bankruptcy?

We have a lot of tips for improving your credit score that we have discussed throughout this post. The best way to begin building credit is to open a secured credit card, make timely payments on it, and work your way up to bigger purchases, such as a car.

4) What happens to credit score after bankruptcy?

After filing for bankruptcy, credit scores drop significantly. The higher your credit score, the more it will go down.

5) What is the average credit score after chapter 7?

The average credit score after a chapter 7 discharge is between 500 and 550. Your score may be lower or higher depending on what other information is in your credit file. For example, if you defaulted on many of your debt obligations prior to filing, your credit score may be lower than someone who did not. As soon as your debt is discharged you should see your credit score improving with a short period of time if you follow the tips that we have included in this post.