How long does bankruptcy stay on your credit report? – Forbes Advisor


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When you file for bankruptcy under Chapter 7 or Chapter 13, two of the most common individual bankruptcies, it can stay on your credit reports for up to ten years. Once a bankruptcy is listed on your reports, it does serious damage to your credit score until it is removed. This means you’ll likely have difficulty qualifying for a mortgage, car loan, or personal loan.

However, the good news is that you can take steps to speed up the credit repair process. Let’s see how long both types of bankruptcies stay on your credit reports. Next, we’ll walk you through some steps you can take to improve your credit score.

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How long does a Chapter 7 bankruptcy stay on your credit report?

After you file for Chapter 7 bankruptcy, it stays on your credit reports for up to ten years and you are allowed to discharge some or all of your debts. When you pay off your debts, a lender cannot collect the debt and you are no longer responsible for repaying it.

If a paid debt was flagged as overdue before you filed for bankruptcy, it will disappear from your credit report seven years from the date of the delinquency. However, if a debt has not been declared past due before you file for bankruptcy, it will be deleted seven years from the date of your filing.

How long does a Chapter 13 bankruptcy stay on your credit report?

A Chapter 13 bankruptcy stays on your credit reports for up to seven years. Unlike Chapter 7 bankruptcy, filing for Chapter 13 bankruptcy involves creating a three to five year repayment plan for some or all of your debts. Once you complete the repayment plan, the debts included in the plan are paid off.

If any of your discharged debts were past due before you filed this type of bankruptcy, they would fall off your credit report seven years from the date of delinquency. All other discharged debts will disappear from your report at the same time as your Chapter 13 bankruptcy lapses.

How Long Do Bankruptcies Impact Your Credit Scores

Since your credit score is based on information on your credit reports, bankruptcy will impact your score until it is removed. This means that a Chapter 7 bankruptcy will impact your score for up to 10 years, while a Chapter 13 bankruptcy will impact your score for up to seven years. However, the impact of both types of bankruptcies on your credit score will diminish over time. Plus, if you practice good credit habits, you might see your score recover faster.

Also, the decrease in your credit score depends on how high your score was before filing for bankruptcy. If you had a good to excellent rating before filing your application, it probably means that your credit rating will drop more than that of someone who already had a bad credit rating.

5 tips to rebuild your credit after bankruptcy

If your credit has taken a hit from bankruptcy, you can rebuild it. Here are five steps you can take.

Related: 7 easy ways to rebuild your credit after bankruptcy

1. Review your credit reports

Monitoring your credit report is a good practice because it can help you detect and correct credit report errors. After filing for bankruptcy, you should review your credit reports from all three credit bureaus: Experian, Equifax, and Transunion. Due to Covid-19, you can view your credit reports for free each week until April 20, 2022 by visiting AnnualCreditReport.com.

When reviewing your reports, check to see if any accounts that were discharged after the bankruptcy was closed are listed on your account with a zero balance and indicate that they were discharged because of it. Also, make sure each account listed is yours and shows the correct payment status and open and close dates.

If you spot an error while reviewing your credit reports, dispute it with each credit bureau that includes it by mailing a dispute letter, filing a dispute online, or contacting the agency. evaluation over the phone.

2. Never miss a payment

Payment history is the most important credit factor, accounting for 35% of your FICO credit score. If you pay off your outstanding debts on time, it could improve your credit score. However, if you make late payments or fail to repay a loan, your credit score may suffer further damage.

3. Keep your credit utilization rate low

Another key credit score factor is your credit utilization rate – it makes up 30% of your FICO score. Your credit utilization rate measures the amount of credit you use compared to the amount you have. For example, if your available credit is $10,000 and you are using $2,000, your credit ratio is 20% ($2,000/$10,000).

While it’s often recommended to keep your ratio below 30%, you may be able to rebuild your credit faster by keeping it closer to 0%.

4. Consider applying for a secured credit card

After filing for bankruptcy, you are unlikely to qualify for a traditional credit card. However, you may qualify for a secured credit card. A secured credit card is a credit card that requires a security deposit — this deposit establishes your credit limit.

As you pay off your balance, the credit card issuer typically reports your payments to all three credit bureaus. Paying off your balance on time can help you build your credit. After you cancel the card, a credit card provider usually refunds your deposit.

When buying secured credit cards, compare annual fees, minimum deposit amounts and interest rates to get the best deal.

5. Become an authorized user on a credit card

If you don’t want to sign up for a secure credit card, you can ask a family member or friend with good credit to add you as an authorized user on one of their credit cards. You may see an increase in your credit score if the issuer reports the card’s positive payment history to the three major credit bureaus. However, your score could drop if the primary cardholder makes a late payment or goes over their credit limit.

Conclusion

Depending on the type of bankruptcy you file, it can stay on your credit report for up to ten years. This can negatively impact your ability to access credit for a long time. However, over time, its impact on your credit score will diminish. If you want to get a head start on repairing your credit score after bankruptcy, take some of the steps mentioned above.

Increase your FICO® score instantly with Experian Boost™

Experian can help you increase your FICO® score based on paying bills like your phone, utilities, and popular streaming services. Results may vary. See website for more details.

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