What effect does bankruptcy have on your credit score?

First of all, you should know that bankruptcy can remain on your credit report for up to ten years. Other bad debts are removed after seven, but not bankruptcy. The impact that a bankruptcy filing has on your credit really depends on your credit report and score before filing. Many times people considering bankruptcy already have negative collections or bad debts on their report. So, they may already have a low credit score. Bankruptcy may not affect their credit scores as negatively as someone with a higher score. If you have a fairly high score and little bad debt listed, your score will probably take a quite a hit after filing your case.

How quickly your score improves after filing depends on you. After filing you will probably start to see lots of credit offers in the mail. Many financial advisors and bankruptcy attorneys suggest obtaining a low limit, secured credit card after filing. Use it on small purchases (like gasoline) and pay it off each month. And be sure to make all of your payments on time. This will slowly start to rebuild your credit. You can also look into obtaining a small line of credit from your bank or credit union. For some, the thought of obtaining new debt after filing for bankruptcy may be a scary thing. But, it’s a surefire way to slowly start rebuilding your credit.

You also want to ensure that your credit report is accurate after filing for bankruptcy. You can pull your credit report for free once a year at www.annualcreditreport.com. Pull your credit report and check that all of the debt that was included in your filing is reflected that way on your report. If something is incorrect, contact each of the three credit bureaus and get it corrected right away. You will need to send each of the bureaus copies of your notice of case filing, discharge notice, and schedules from your filed petition showing the debts that were included.

Rebuilding your credit after filing for bankruptcy can be a long process. But you just have to keep in mind that it is achievable. You didn’t get into financial trouble over night, so you can’t expect to dig out of it that quickly. It will take some time, patience, and hard work on your part. The bankruptcy gave you the fresh start that you needed. Now you just have to be willing to put in the work to get you back in a good financial position.

Blog Contributed By: Kelly Snyder