Returning To Good Credit After Bankruptcy
A personal bankruptcy filing will affect your credit report for a certain amount of time depending on how you file:
- Chapter 13 bankruptcy stays on your credit report for 7 years after final discharge
- Chapter 7 bankruptcy stays on your credit report for 10 years after final discharge
Having a bankruptcy on your record for 7-10 years does not mean it will take you this long to repair your credit score or get out of debt.
Right away, the “final discharge” releases you from personal liability in most debts. You need this bankruptcy discharge before you can take steps to build toward better credit, otherwise, you will continue to have large debts.
Once the process starts, you can decide what choices to make to rebuild your credit.
What To Do If Your Bankruptcy Is Still Showing Up On Your Credit Report After Six Years
September 27, 2011 by admin
Another great question from my email bag, this one regarding what to do if your bankruptcy is still showing up on your credit report long after it was supposed to have dropped off. Heres what the she wrote:
If you applied for bankruptcy once before re: like I did 20+yrs ago and was completely discharged of the bankruptcy etc. then why does the bankruptcy still stay on your record? What is the point of the discharge and going through the whole process, having the bankruptcy show on your credit history for 7yrs etc. when it is never completely absolved from your personal credit history. I hope to find some loophole to get this removed from my history however I am running up against roadblocks and no one can give me a divinitive answer either way which is extremely annoying/frustrating!!
I can tell youre frustrated I would be too! Because its only been 3 years since my bankruptcy was discharged, I have not yet had the pleasure of seeing it drop off my credit report. However, I have run into similar situations. When I first started doing routine checks of my Equifax Canada and TransUnion credit reports, I noticed there were some inaccuracies. But, after I submitted the appropriate request forms, they were all corrected.
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Have A Look At The Credit Report
Take a look at your credit report frequently. So that you can determine the factors that affect your credit scores. You can also request a free credit report from any of the credit bureaus.
Youll be able to spot any errors that put your score down- like incorrect account information or public records.
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Will A Bankruptcy Ruin Your Credit Forever
No, a bankruptcy will not ruin your credit forever. When you first file for bankruptcy your credit score will take the biggest hit. As the bankruptcy ages, your credit score will improve so long as you responsibly borrow and make timely payments. Also, a bankruptcy only remains on your credit report for 10 years. After the 10 year period, the bankruptcy will be removed and your credit score will increase.
Buying A Home After Bankruptcy
As noted above, a bankruptcy will linger on your credit report for up to 10 years. This, however, does not mean you cannot qualify for a mortgage for 10 years.
Still, lenders want to be confident about the borrowers ability to repay. Besides all the usual investigation into job and income stability, theyll scrutinize at the applicants payment history.
After a bankruptcy, then, youll have to temper your new-house fever for, probably, at least a couple of years. Meanwhile, you can distinguish yourself as someone who makes timely payments on your secured credit card, and possibly your secured loan or car loan.
Also, the longer you can wait to buy a home after bankruptcy, and the better you can rebuild your credit, the more likely you are to strike a better deal on your interest rate. A half-point difference on a 30-year fixed-rate loan could add up to nearly $100 a month, and tens of thousands of dollars over the life of the loan.
Once youre in the market again, after about two years be sure to include government-insured loans in your shopping. These tend to be more forgiving of bad credit scores. Investigate FHA- or, if youre looking in a rural community, USDA-backed loans. Veterans whove been two years with clean credit post-bankruptcy can access their VA benefits.
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Have Someone Cosign For A New Credit Card Or Loan
Another idea is to have someone close to you cosign your loan. By making regular payments on the loan, you can nudge your credit score back up and into shape.
Your cosigner may be a relative or very close friend, but he or she should have a good enough credit score to make up for yours. They should also be aware that if you dont pay the loan, their credit score will suffer for it.
If you are unsure of your ability to repay the loan, its probably not worth it to risk dragging someone you care about into the mud with you. Cosigners will work best for those of you with steady incomes, who, if not for a poor credit score, would have little trouble securing and repaying a loan on their own.
How Long Does It Take To Get My Credit Back After Bankruptcy Or Proposal
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Bankruptcy is designed to eliminate overwhelming debt and reset your finances. One of the most common concerns I hear is: How long does it take to get my credit back after my bankruptcy or consumer proposal is over? There are two answers to this question. How long bankruptcy will remain on your credit report and what you can do to rebuild your credit.
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What Happens To Your Credit When You File For Bankruptcy
How long your bankruptcy stays on your credit report depends on the type of bankruptcy you file. The two most common types of consumer bankruptcy are Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, you do not repay any of the debt owed. This type of bankruptcy listing remains on the credit report for 10 years from the date it is filed. Under Chapter 13 bankruptcy, you are responsible for paying back a portion of the debts that you owe through a debt repayment plan. A Chapter 13 bankruptcy is removed from your report seven years from the date it is filed.
Having a bankruptcy in your credit history will seriously affect your ability to obtain credit for as long as it remains on your report. If you do qualify for credit while the bankruptcy is part of your credit history, you will likely have to pay higher interest and fees than you would otherwise. It can also affect your ability to qualify for things like an apartment, utilities and even employment. Even insurance rates may be affected.
What To Do After Your Bankruptcy Is Discharged
Once your bankruptcy is discharged, you should do the following:
- Pull your credit reports from Equifax, Experian and TransUnion to confirm that your lenders are accurately reporting the discharge. Only the debts included in the bankruptcy filing should be reported as discharged.
- Double-check that all of those accounts included in the bankruptcy show a zero balance on your credit reports.
- Consider applying for a new credit card once youve confirmed that your credit reports are accurate.
Even after your bankruptcy is discharged, it may take a while to qualify for a new credit card. Some credit card companies may reject your application simply because you have a recent bankruptcy on your credit report. Others may be less stringent because your risk of filing for bankruptcy again is low, since there are rules restricting when you can file for a second bankruptcy.
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Comparing The Best Credit Cards After Bankruptcy: Earning Rate
Of the three cards we’ve chosen, only the Discover it® Secured Credit Card offers users any rewards on their spending.
The Discover it® Secured Credit Card offers users 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. 1% unlimited cash back on all other purchases – automatically. Discover will also automatically match all the cash back you’ve earned at the end of your first year. These are great benefits considering there is no credit score required to apply, so you can earn rewards on your responsible use of your card all while working to rebuild your credit.
While the other two cards on our list don’t offer any rewards structure, for consumers who have filed bankruptcy, it’s much more important to focus on responsibly rebuilding your credit than on earning rewards, so these cards are good options, too.
After Your Bankruptcy Is Discharged
Once you are discharged from bankruptcy, your credit rating will be R9. An R9 rating is the lowest credit rating you can have. You will have this rating for 6 years if it was your first bankruptcy and for 14 years if it is your second bankruptcy.
An R9 credit rating can make it hard to get a mortgage or a credit card. For example, instead of a credit card, banks might give you prepaid cards or cards that require you to collateral. It might also be hard to get other types of loans, or even good interest rates on loans.
If it is your first bankruptcy, you must wait 6 or 7 years for the information about your bankruptcy to be removed from your credit report. Both your credit rating and credit score will also be erased. Your credit report will look like you never had any credit before.
You will have to start building your credit again. You can do this by opening a bank account and getting a credit card. It is important to use your credit carefully so you do not get in debt again.
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Apply For A Loan With A Co
Should you apply for a loan on your own, lenders might deem you risky because of your credit past. Getting a co-signer on a loan can help boost your chances of getting approved. Thats because lenders will consider the co-signers credit score, which would up your creditworthiness. When someone cosigns a loan, they dont have access to the money. However, they are on the hook for repayment should you be unable to keep up with your payments.
Why this matters: Rebuilding credit after youve filed bankruptcy can help you reestablish your credit profile. By understanding the different options, youll learn how these different forms of credit might help you boost your credit after its been on shaky ground.
How to get started: Explore the different options for establishing a new line of credit and see which ones you think might benefit you. Youll want to consider whether a hard pull or soft pull on your credit is required, what you would use that line of credit for, setting limits on a line of credit, and having a repayment plan intact so you dont fall into a deeper debt hole.
How To Rebuild Credit After Bankruptcy
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A bankruptcy gives you the relief of a clean financial slate but also the worry that youll never have decent credit again.
Although a bankruptcy stays on your credit reports for up to 10 years, its impact on your score will fade with time. In fact, your credit score after bankruptcy may not be as bad as you think. You may actually have a higher credit score a year after bankruptcy than before filing because you stop fighting an impossible battle and begin rebuilding.
If you were eligible to file for bankruptcy, whether it was Chapter 7 bankruptcy, the most common kind, or Chapter 13 bankruptcy, your credit may have already been in tatters. But you can begin to restore your credit right away by offsetting the negative information on your credit report with something more positive.
How Long Does It Take To Improve Your Credit Score After A Bankruptcy Discharge
How long Does It Take To Improve Your Credit Score After A Bankruptcy Discharge?
This is a question we often get, and the answer is it is up to you. A bankruptcy will remain on your public record for anywhere from 7 to 10 years but its effect fades over time and many people begin to see their score improve almost immediately. One reason why is the amount of debt that you owe has been significantly decreased and many creditors out there are willing to give you a second chance. What you do with this fresh start will determine how much your credit improves and how quickly.
Usually, it does not take long at all before you get an offer for a low-limit credit card. This can act as your first baby step, and if you move forward with on-time payments, as well as responsible credit usage and keep your utilization below 30% it will not be long before your second offer comes in. Or your next credit application is approved.
What Is The Credit Score Cost Of Waiting To File
While a 240-point drop is certainly worth noting, its also worth noting how much waiting to file or not filing at all can negatively impact your score.
Bankruptcy can give you a clean break from debt, which means you can focus on rebuilding. On the other hand, digging yourself out of debt can take years and lead to more damage.
- Missed payments remain on your credit report for seven years.
- Collection accounts remain for seven years from the date the original account became delinquent.
- Debts that get settled remain on your credit for seven years from the date of filing.
So, while bankruptcy will negatively affect your credit, not filing can also have a significant negative impact. And the damage can last just as long.
Talk to a debt relief specialist to see if bankruptcy is the best option for you.
What Is The Formula For Calculating A Credit Score
TransUnion Bureau, Experian, and CRIF Highmark all use various scoring methodologies to compile credit report data. If you wish to check your Credit score online, these services will supply you with reports. These scoring models use a variety of components to calculate an individuals credit report, and the importance of each element on the final credit report varies depending on the scoring model used.
This is why, while having the same credit history, the same person will receive a different score from each CIC. It may have a low Credit score, but it will no longer be low if you work hard to improve your score. This is due to the fact that credit bureaus each have their own proprietary technique for determining a persons credit report and the specific breakdown.
What Makes Up Your Credit Score
are based on data collected over months and years. Credit scores move slowly. One montheven six monthsof data may not be enough to sway the credit scoring company to improve your score significantly. Instead, look to see improvements after a year or two.
Various factors influence your credit score. Those factors are weighted to put the most emphasis on your payment history and level of debt. Other aspects of your financial life that go into your credit score include how long you’ve been borrowing, the diversity of your debt type , and the average age of your lines of credit .
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Keep Up With Payments On Existing Loans And Credit Cards
Instead of trying to get funds right away, focus on making timely payments on existing loans or credit cards every month to help reestablish your credit. Payment history makes up 35 percent of your FICO score, so making on-time payments is one of the best ways to build your credit and show that you can be financially responsible.
Why this matters: Taking the proper steps to rebuild your credit after filing bankruptcy will improve your financial behaviors and show future lenders your creditworthiness.
How to get started: Work on making timely payments by signing up for autopay. At the least make the minimum payments. If possible, make extra payments.
To help make sure youre paying on time, set up reminders. Some credit cards can have a reminder sent to your phone or email before the due date. Monitor your spending. You can set alerts if you use your credit card to pay for something over email, phone, or online or if youve spent over a certain amount.
How Long Will It Take To Build Credit After Bankruptcy
It will take a while to increase it to the “Good” category, which is 750 or above. It may take up to 24 months to boost your credit score to the “Fair” category, which is 650 or higher if you continuously attempt to rehabilitate your credit after declaring bankruptcy. However, it totally depends on the type of bankruptcy and your consistent efforts to establish credit after bankruptcy.
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