How Long Can Bankruptcy Affect Your Credit Scores
Bankruptcy can affect your credit scores for as long as it remains on your credit reports. Thats because your scores are generated based on information thats found in your reports.
But the impact of bankruptcy on your credit scores can diminish over time. This means your credit scores could begin to recover even while the bankruptcy remains on your credit reports.
After the bankruptcy is removed from your credit reports, you may see your scores begin to improve even more, especially if you pay your bills in full and on time and use credit responsibly.
What Is A Bankruptcy
Bankruptcy is an official court order to dismiss or rearrange your debts when you cant keep up with them. It may eliminate debts or restructure them in a more affordable payment and structure.
Either way, bankruptcy has serious effects on your and should be taken seriously. Knowing how it affects your credit and how long it follows you is important before you decide.
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Get A Secured Credit Card
If you dont mind making an initial deposit to access your credit line, a secured credit card may be right for you. Theyre another great way to help rebuild your credit after bankruptcy and function just like unsecured credit cards. However, they sometimes come with hefty APRs and administrative fees. And the creditor holds your deposit until the account closes or the creditor extends an unsecured credit card offer to you.
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Correcting Misreported Discharged Debt
Disputing errors is relatively straightforward. You’ll do so by using the online procedure provided by each of the three major credit reporting agencies.
A creditor who repeatedly refuses to report your discharged debt properly might be in violation of the bankruptcy discharge injunction prohibiting creditors from trying to collect on discharged debts. If you take steps to remedy the misreporting, and the creditor refuses to fix the error, talk to a bankruptcy attorney.
How Long Does A Bankruptcy Stay On My Credit Report
There are differences in severity between a Chapter 7 and a Chapter 13 bankruptcy. According to the Fair Credit Reporting Act , a Chapter 7 bankruptcy can remain on your credit history for up to 10 years from the filing date and a Chapter 13 bankruptcy can remain for a maximum of 7 years.
The FCRA states only the legal maximum amount of time bankruptcies can appear on your report and not the minimum. This means a bankruptcy can be removed earlier than the legal maximum, but it must be proven that it is misreported, unsubstantiated or otherwise found inaccurate. A bankruptcy cannot be removed simply because you do not want it there.
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How Do I Remove A Bankruptcy From My Credit Report
Removing bankruptcy can be difficult but it can be done. Keep in mind that this may or may not work depending on the particulars of your situation.
The bankruptcy court states right on their website that they do not verify or report bankruptcy information to the credit reporting bureaus and that they can not change your credit report.
It may take 60-120 days to succeed if you do. We have to keep in mind every creditor added to your bankruptcy is indicated individually on the credit report. The debt listed under the bankruptcy will show the $0 owed versus the balances originally owed.
Check Your Credit For Inaccuracies
You need to look for any inaccuracies that may be part of the bankruptcy entry. You will want to look very carefully for any mistake.
- Identity information
- Accounts that may belong to another person with the same or similar name
- Incorrect accounts that occurred from identity theft
- Closed accounts reported as open
- You are reported as an owner of an account but are only an authorized user
- Accounts incorrectly reported as late or delinquent
- Incorrect date opened, date of last payment, date of delinquency
- Same debt listed more than once
- Accounts that appear multiple time with different creditors listed
- Incorrect current balance
- Incorrect credit limit
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There may be other inaccuracies you find as well the important part is to look closely and pay attention to detail.
If there are any inaccuracies, you simply dispute the bankruptcy entry with the credit bureaus, saying the information is incorrect and therefore should be removed.
Dispute via letter with the mistakes explained and make sure to send to each bureau. If there are no inaccuracies, move on to the next step.
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Send A Dispute Letter
Now that you have identified the mistakes that you would like to dispute, you need to place them into a letter for bankruptcy removal and send them to the entity that made the error. This is also called a challenge. Your letter should contain the following information:
- Your contact information and a polite header
- All of the mistakes you believe you have found
- Solid evidence that the mistakes are indeed incorrect and
- Any necessary attachments.
If you do not submit enough evidence of the inaccuracies, you risk your challenge being denied. So, make sure that you provide solid enough proof that supports whatever statements you make. Also, be sure to be respectful and kind in your letter, as the person reading it is not the one who made the mistake. They are the ones, however, who stand between you and removing a bankruptcy from your credit report.
After sending your challenge, it could take as little as one week to hear back about the answer. Or, you may wait up to a month. Exercise patience. If your challenge is accepted, then your credit reports will all be cleared of the error, and you should see a rise in your score.
What Accounts Are Included In Bankruptcy
Usually, a person declaring bankruptcy is having serious difficulty paying their debts and their accounts are often significantly delinquent.
If an account was delinquent when it was included in the bankruptcy, it will be deleted seven years from its original delinquency date, which is the date the account first became late and was never again brought current. Declaring bankruptcy does not alter the original delinquency date or extend the time the account remains on the credit report.
If the account was never late prior to being included in bankruptcy, it will be removed seven years from the date the bankruptcy was filed.
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Clean Up Your Financial Act
There are a number of reasons why you may have been forced to file for bankruptcy. But whats most important when rebuilding your credit is not the culprit, per se, but making sure that history doesnt repeat itself. In other words, you want to establish a solid plan for your finances to make your money work for you. In your list of objectives should be creating a realistic budget that keeps your spending in check, safety net, and plans to eradicate debt that wasnt included in the filing.
How Much Will Credit Score Increase After Bankruptcy Falls Off
Your credit score will increase by 50 to 150 points after a bankruptcy is removed from your credit report. The removal of bankruptcy can dramatically increase your credit score because bankruptcy is the most negative item that can appear on your credit report. The amount of points your credit score will increase depends on other items you have on your credit report.
If you have other negative items bringing down your credit score, you might not see a huge increase. But if nothing else is affecting your credit score, the removal of bankruptcy will likely result in a huge increase in your credit score.
If, after filing for bankruptcy, you open new accounts, make all of your payments on time, you should see a substantial increase in your credit score once the bankruptcy is removed from your credit report.
Many people have reported that their credit score has increased by 50 to 150 points after the bankruptcy fell of their credit report. That said, some saw a 50 point increase, others saw a 91 point increase, and others experienced a 150 point increase. So, your point increase will vary depending on the information in your credit report.
If, after filing for bankruptcy, you opened new credit cards, racked up a lot of new debt, and missed payments on your account, you will be hurting your credit score and the removal of a bankruptcy would have little to no impact on your credit score because the new derogatory information will drag your credit score down.
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How To Remove A Dismissed Bankruptcy
Verified bankruptcies can’t be removed from your credit report. However, you can remove them if they’re inaccurate. Finding & disputing these mistakes can be tricky. Here’s how you can do it.
- Check your credit report for errors – Before you can dispute an error, you have to find it first. You can find common errors in personal info, account status, and balance & data mistakes.
- Verify information – According to the FTC, 20% of the population has at least one error on their credit report. Inaccurate negative marks hurt your score. That’s why it’s important to verify the info on your report.
- Dispute inaccuracies – Once you have found errors, you can dispute them. This means gathering evidence, writing a dispute letter to all 3 credit bureaus, & waiting.
- Work w/a credit repair professional – Finding and disputing errors yourself is a hassle. Teaming up with a credit repair expert simplifies the process. They know what to look for & help you avoid costly mistakes, so you can easily boost your credit.
How Long Do Bankruptcies Stay On Your Credit Report
The length of time that a bankruptcy filing stays on your credit report depends on what type of bankruptcy you filed. We took a look at Chapter 7 and Chapter 13, which are the two main types of consumer bankruptcies, and to see how their impacts on your credit score differ.
- Chapter 7 bankruptcy: Also known as liquidation bankruptcy, Chapter 7 is what Harrison refers to as “straight bankruptcy.” It’s the most common form of consumer bankruptcy and is usually completed within three to six months. Those who file for Chapter 7 will no longer be required to pay back any unsecured debt , like personal loans, credit cards and medical expenses, but they may have to sell some of their assets to settle secured loans. Chapter 7 bankruptcies stay on consumers’ credit reports for 10 years from their filing date.
- Chapter 13 bankruptcy: Harrison refers to Chapter 13 as the “wage earner’s bankruptcy.” This form of filing offers a payment plan for those who have the income to repay their debts, just not necessarily on time. About a third of bankruptcies filed are Chapter 13 . Those who file are still required to pay back their debts, but instead over a three-to-five year time frame. Chapter 13 bankruptcies stay on consumers’ credit reports for seven years from their filing date.
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Let Nature Take Its Course
Make sure your credit report is accurate. Once youve corrected any errors, sit back and start working on improving your financial situation. Your bankruptcy will come off your report in due course. In the meantime, do what you can to make sure it doesnt impact your life and ability to get new credit.
Its far more important that worrying about the impact of your bankruptcy on your credit report or score.
What Should You Do To Improve Your Credit Score After A Bankruptcy
After you have filed for bankruptcy, it will be very difficult for you to be approved for any type of credit, including regular unsecured credit cards. So, you should ease back into borrowing money by applying for a secured credit card. A secured card is just as good for your credit as is an unsecured credit card, but there is a difference. With a secured credit card, your credit limit is determined by a security deposit that you give the issuer.
For example, if you want a $500 credit limit, the card issuer will ask you for a $500 deposit. The security deposit is kept by the bank as collateral in the event that you fail to repay your credit card. Usually, if you use the credit card and make all of your payments on time, the card issuer will return the security deposit to you within 12 to 18 months.
Dont be discouraged from applying for a secured credit card after your debt has been discharged. Its one of the greatest ways to build a good credit history after bankruptcy. That said, make sure to make all of your payments on time and dont fall back into the bad habits that cause you to file for bankruptcy the first time.
Here are some quick tips on improving your credit score:
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Checking Credit Report Accuracy After Bankruptcy
You’re entitled to get a free credit report from the three major credit reporting agencies each year. You can claim your reports by visiting www.annualcreditreport.com.
Instead of getting them all at once, a prudent approach is to claim one report three months after receiving your bankruptcy discharge. That should allow enough time for creditors to report the bankruptcy information.
Thoroughly review each listed debt for accuracy. Also watch out for unfamiliar creditor names or debts, as they might be discharged debts that were bought and sold to a third party, but are not accurately reflected as having been discharged. To make changes, follow the instructions under the “Correcting Misreported Discharged Debt” heading.
You’ll want to claim each of the remaining two credit reports at three-month intervals. Each time, check to see if the credit report reflects the previously requested changes, and, take steps to correct any remaining inaccurate information. This approach should allow you to clean up your credit report at no cost to you.
Can A Bankruptcy Come Off My Credit Report Early
A legitimate bankruptcy record cannot be removed from your credit report, but a bankruptcy can come off your report if it is inaccurately entered or otherwise incorrect.
The FCRA makes provisions for challenging anything on your credit report that is incorrect, has remained on your credit report beyond the maximum time allowed, or cannot be substantiated by the creditor who reported it.
In the case of bankruptcies especially because they remain on the credit report for so many years its not uncommon for errors to creep in.Some of the most common errors we find include:
- Debts that were discharged in the bankruptcy are still showing a balance.
- Individual accounts included in the bankruptcy are still appearing on the report after seven years. In both Chapter 7 and Chapter 13 bankruptcies, the individual affected accounts can only impact your report for seven years starting from original delinquency date, not the filing date of the bankruptcy in which they were discharged.
- The bankruptcy is still showing up on a report more than 10 years after the filing date.
- Any sort of material error in how the bankruptcy was reported, from the spelling of names to accurate addresses, phone numbers, dates, etc.
If any of these or other errors appear on your credit report, you have the right to challenge those errors. The reporting agency must remove them if the reporting agency cannot substantiate the item.
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How Long Does Bankruptcy Stay On Your Credit Report
Myth: Bankruptcy ruins your credit foreveror at least an entire decade.
The truth: Bankruptcies are considered public records, which is how theyre reported on your credit. The public record associated with a Chapter 7 bankruptcy will remain on your credit report for as long as 10 years. That time period starts on the date you file the bankruptcy petition.
Chapter 13 bankruptcyis different. It involves paying some money back to your creditors and typically take three to five years. However, it only stays on your creditfor around seven years from the petition filing date. That means that within two to four years after successfully finishing a Chapter 13 bankruptcy, it will fall off your credit.
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How Can I Get A Copy Of My Credit Record
There are two ways to get your credit report : either through the mail or via the internet. If you want to obtain your credit report for free, you must use the mail. It is also important to do what you can to make sure your credit report shows a history of reliable credit repayments, and as few unfavorable repayment incidents as possible.
For more detailed information related to credit reporting, visit Equifax Canada or Trans Union website. Talk to a licensed trustee today. We have trustees everywhere from Calgary to Montreal and more. Get a free consultation today!
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