Most people already know that bankruptcy is going to drag down their credit score. What they may not realize is how many factors influence the full impact of a bankruptcy on their credit report, how long that bankruptcy will stay on their report and how they can rebuild their credit score after bankruptcy.
Bankruptcy will bring down your credit score, but it will also potentially lead to better credit in the future. The better your understanding of how bankruptcy affects your credit, the easier it will be for you to rebuild after you file for personal bankruptcy.
How low your score goes depends on many factors
If you have reasonably good credit before you file bankruptcy, you can expect about a 100 point drop or more after you file. If your credit is already damaged, however, bankruptcy isn’t likely to have quite as significant of an impact. The true effect of a bankruptcy on your credit is influenced by the number of accounts that you have, the amount of time that they’ve been delinquent, and more.
Many people find that they can start rebuilding their credit score within weeks of their discharge through new credit cards, which might allow them to qualify for things like car loans and mortgages within a few short years. For people with damaged credit, bankruptcy can actually turn their situation around and allow their credit score to slowly recover.
Bankruptcy won’t stay on your record forever
Some people think that bankruptcy will be a permanent blemish on their credit report, but it won’t. Like all other negative marks, bankruptcy will eventually age off of your report. How long it stays depends on the kind of bankruptcy you file.
Your Chapter 7 bankruptcy will stay on your credit report for ten years after your discharge, while a Chapter 13 bankruptcy will only be on your report for seven years after the date of discharge. Your plans for future credit, as well as your current income and assets, will directly influence what kind of bankruptcy you should file and what benefits you derive from discharging your debts.
For a realistic understanding of what will happen to your credit after bankruptcy, talk to an experienced advocate about your situation.