How Soon Will My Credit Score Improve After Bankruptcy?
By FindLaw Staff | Legally reviewed by Bridget Molitor, J.D. | Last reviewed June 30, 2021
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You can typically work to improve your credit score over 12-18 months after bankruptcy. Most people will see some improvement after one year if they take the right steps. You can't remove bankruptcy from your credit report unless it is there in error.
Over this 12-18 month timeframe, your FICO credit report can go from bad credit (poor credit is traditionally less than 579) back to the fair range (580-669) if you work to rebuild your credit. Achieving a good (670-739), very good (740-799), or excellent (800-850) credit score will take much longer.
Many people are afraid of what bankruptcy will do to their credit score. Bankruptcy does hurt credit scores for a time, but so does accumulating debt. In fact, for many, bankruptcy is the only way they can become debt free and allow their credit score to improve. If you are ready to file for bankruptcy, contact a lawyer near you.
Bankruptcy Affects High Credit Scores More Than Low Credit Scores
The higher your FICO score is before a bankruptcy filing, the more it will affect your credit rating:
|Score||Average Drop in Credit Score|
|Excellent (850-800)||200 points|
|Very Good (740-799)||200 points|
|Good (670-739)||200 points|
|Fair (580-669)||130-150 points|
Note: Scores do not go lower than 300
You will likely drop to a poor credit score no matter what score you started with. Your credit history already shows you filed for bankruptcy, but credit bureaus want to ensure you take steps to improve your bad credit before you take on more debt and new credit.
The sliding scale system will generally knock your credit points however much it takes to show you have poor credit. Your score may barely change if you already have bad credit (less than 579). It is not common to see credit scores lower than 500 even after a bankruptcy filing.
What Bankruptcy Will Affect While on Your Credit Score
Your payment history, on-time payments, and recent credit reporting can all affect how lenders work with you.
Once you file bankruptcy and businesses see your credit report's negative information, you may have concerns about:
- Getting a car loan
- Buying a house or renting an apartment
- High-interest rates on financing
- Low credit limits on unsecured credit cards
- Student loan repayment schedules
- Penalties for late payments
- Credit utilization for anything but necessities
- Getting large cash deposits
- Getting loans without a qualified co-signer
- Adding authorized users to some credit cards
- Security deposits and returns of safety deposits
You have options regarding all these concerns if you are having credit or debt issues. There are ways to address each concern by yourself or with professional help. Getting a fresh start is possible, especially after filing bankruptcy.
What If I Need a Loan or Credit Card Immediately After Bankruptcy?
Luckily, most mortgage companies provide FHA loans for scores of 560-600. Traditional financing options often require a score of 600 or higher.
There are options for buying high-cost necessities after filing bankruptcy claims. Secured credit cards and loans exist for those facing bankruptcy. You can look into credit builder loans or other financing options specially built for people after bankruptcy.
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.
How to Build Credit After Bankruptcy
You can start rebuilding your credit score after the bankruptcy stay stops creditors from taking action. Bankruptcy will show on your record for 7-10 years, but every year you work to improve your credit, the less it will affect you and the financing you seek.
You need to wait 30 days after you receive the final discharge. This means most (or all) of your accounts will be at a zero balance, and creditors must stop calling you about debts.
To rebuild your credit score, you should:
- Request three free credit reports and check that the balance is zero. You get these three reports under federal law
- Go through the credit repair dispute process if any of these accounts do not have a zero balance
- Pay student loans or other unforgiven debts on time to start rebuilding your credit history
- Request a secured credit card if possible. You can often open these with a cash deposit or if you have a personal loan. Use the card for small essential purchases.
- If you have any remaining credit cards, plan to pay off at least 70% of the credit limit each month. Do not open more than one new credit card every six months (and only if you can afford to make the payments).
- Work towards a car loan or another large loan to slowly build a diverse mix of reasonable debts
By following these short- and long-term ideas, you should start to see your credit change in 12 months.
Bankruptcy Information Can Be Wrong
You may want to hire a credit repair attorney if your record shows inaccurate financial or bankruptcy information. They can speak with credit reporting agencies, credit card companies, or credit card issuers if you are having personal finance trouble. An attorney can also step in if a company does not discharge your debt correctly or you fall into a credit counseling scam.
Remember: A bankruptcy discharge legally stops creditors from harassing you. You have rights if a company is not following the process or respecting your bankruptcy filing.