The bankruptcy process is daunting, and most filers focus completely on getting the bankruptcy process completed. But life goes on after filing for bankruptcy, and it is important to start immediately working on rebuilding your credit score.
If you have filed for a Chapter 7 bankruptcy, this will stay on your credit report for 10 years. None of the debt amounts or details will be listed on your credit report, but it will state that the filer’s debts were “discharged in a Chapter 7 bankruptcy.”
Chapter 13 bankruptcies take longer to remove from one’s credit report. The actual bankruptcy itself stays on for only seven years. However, this seven-year period does not officially begin until the debtor completes a Chapter 13 payment plan. Following through on this plan usually takes about five years. So if you have filed a Chapter 13 bankruptcy, it takes about 12 years to have it removed from your credit report.
Although bankruptcy remains on a credit report for years, one who has filed bankruptcy can begin rebuilding his credit as soon as his bankruptcy is over. To improve one’s score after filing, it is a good idea to get a secured credit card and pay the balance in full every month. Secured cards typically require cash to be deposited up to the amount of the credit limit of the card and the debtor will be required to pay a yearly fee of around $30.
While this might seem like a hassle and an expense and maybe even a little overwhelming to obtain, it is important to note that a secured credit card appears on a credit report like any other credit report. As the months go by, those on-time payments and lack of a credit card balance will reflect positively on your credit report. It may take as little as six months to see an improvement. Usually a non-secured credit card can be obtained about a year after filing for bankruptcy. This also will help improve a credit score. In addition, if the filer can qualify to purchase a vehicle or furniture and continue to make on-time payments, the credit score will continue to improve.
Within two or three years of filing for bankruptcy, a filer who has taken steps to improve credit, can typically expect to see their credit score increase up to as high as 680. As you continue to make on-time payments, keep from holding balances on credit cards and begin to pay off debts, this score will continue to increase.
Remember that credit reporting agencies focus on recent credit history, within the last three to five years. This works to the advantage of someone who has filed for bankruptcy and is working hard to improve the credit score. By establishing strong, positive recent credit, that bankruptcy will have less of an effect on the credit score. Also, be sure to check your credit report yearly and check for any errors. If you find errors, contact the credit reporting agency and make sure the errors are removed from your credit report.
If you have filed for bankruptcy and also have a foreclosure on your credit, obtaining another mortgage can be very difficult. The foreclosure will stay on a credit report for seven years. Despite this, if the debtor continues to improve the credit score, this foreclosure won’t have as much impact if the filer wishes to apply for a new mortgage. A bankruptcy filer with a foreclosure may qualify for a new mortgage in about three to four years, provided that it has been at least two years since filing for bankruptcy.
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