There is no hiding that filing for bankruptcy can have a negative effect on your credit score, but it is important to know that the effects are simply temporary and there is the potential to rebuild your credit. Although the impact is not permanent, it is still important for you to understand how your credit score could be affected and what to expect as you begin to rebuild your finances and find freedom from debt.
What Is The Initial Impact After Filing For Bankruptcy?
After you have completed your bankruptcy filing, you will likely see a drop in your credit score. This initial impact will be dependent upon what your credit score was before you filed.
If you had a bad credit score before you filed, you will surely see an impact, however it likely will not see a significant drop, particularly if you have delinquent, past-due accounts or a high debt-to-income ration. Although the extent of the effect will vary based on your individual financial situation, but on average those with bad credit should expect their score to drop approximately 150 points.
If your credit score is on the higher end before filing, you should expect a drastically different outcome. Those with good or excellent credit scores will very likely see the biggest impact and drop down to a poor credit score. With a high pre-filing credit score, you could see a drop of nearly 240 points.
Regardless of how much your credit score drops at first, you can begin to make progress on improving and raising your score right away, even while it appears on your credit report. You probably will not be able to raise your credit score into the excellent range until bankruptcy no longer appears on your credit report, you will be able to take it from bad to fair, or even good, during that time.
How Long Does Bankruptcy Remain On Your Credit Report?
Depending on the chapter you file under, bankruptcy will appear on your credit report for 7 to 10 years. Bankruptcy will appear on the public record section of your credit report and will replace the listing of any high debt balances or delinquent accounts. Because bankruptcy appears as one negative item and takes the place of multiple negative items, you could see a slight improvement in your credit score, as your credit report will appear more balanced.
If you have filed for Chapter 7 bankruptcy, it typically will remain on your credit report up to 10 years, while a Chapter 10 filing remains for 7 years. Regardless of which is filed, it will be removed 7 or 10 years from your filing date.
What Can You Do To Improve Your Credit Score?
Credit scores will inevitably begin to improve quickly as debt is consolidated and your bankruptcy case progresses, however there are a few simple actions that can be taken to see even more improvement. Do your best to keep credit balances low being careful to keep balances under 30% of your credit limit and be sure to make all monthly payments on time.
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