Bankruptcy
can have a very detrimental impact on your credit score. Bankruptcy
will display on your credit report for a period of up to ten years which
can hurt your credit score badly. And if are not filing for bankruptcy
and letting your debts go the collections departments can further
negatively impact your credit score. Bankruptcy can bring down your
credit score by 160-220 points. Bankruptcy can make it extremely
difficult for you to get approval for a home loan or credit cards by the
financial institutions.
What you can do is take certain measures to increase your credit score and this you can do by managing your existing credit well which can gradually increase your credit score and make your financial situation better despite a bankruptcy showing on your credit report.
Chapter 13 bankruptcy
Chapter 13 bankruptcy can stay on your credit report for a period of up to seven years. The debts that come under bankruptcy are shown in a very different manner in your credit report. Even if the debts associated with bankruptcy have been completely paid off .These paid off debts do not drop off from your credit report and continue to reflect on your credit report for a period of 7 years
Chapter 7 bankruptcy
A chapter 7 bankruptcy stays on your credit report for up to 10 years. Usually the debts associated with chapter 7 bankruptcy get settled within a few months after filing for bankruptcy, so they should clear off from your credit report before the expiry of the bankruptcy. But the paid off debts are dropped off from the credit report only after completion of 7 years.
However as the debts get older, they have less impact and significance on your credit score.
HOW TO REPAIR CREDIT AFTER BANKRUPTCY
Certain measures have been listed below that can help in credit repair after bankruptcy
KEEP A TRACK OF YOUR CREDIT SCORE
It is very important to check your credit score regularly particularly after filing for bankruptcy. Make a list of all the debts that are associated with bankruptcy and check their status regularly after every few months once the debts have been cleared.
START THE PROCESS TO REBUILDING YOUR CREDIT AS SOON AS POSSIBLE
Whether you have filed for chapter 7 bankruptcy or chapter 13 bankruptcy. It will clear off from your credit report after a period of 7 years or 10 years. In case none of your accounts are open for a period of more than 10 years, then you will have no credit history and zero credit which will make it difficult for you to get any approval for loans by the lenders in the future.
Therefore. It is very important for you to start building your credit soon after the bankruptcy has been discharged from your credit report to rebuild your credit score and credit history.
-get a secured credit card-In case of secured credit cards you are required to give the credit card issuer a lump sum amount of money as a collateral security and you are issued a credit card by the company with a credit limit equivalent to the amount of collateral security given by you to the credit card issuer. These cards have membership fees so read the application form carefully before applying for the card. Secured credit cards are easier to get as compared to the normal credit cards, as the lender is at no risk in granting the credit to you.
Get a car loan-Getting a car loan is very much easier as compared to other loans in case you can make a large amount of down payment.
KEEP YOUR OLD ACCOUNTS OPEN
Older accounts can help improve your credit scores even after declaring bankruptcy. Length of your credit/payment history which makes up to 15% of your total credit score is not affected by bankruptcy. The only way to maintain the length of your credit history is to keep your old credit accounts open and active.
AVOID APPLICATION OF NEW CREDIT ACCOUNTS
In the computation of your credit score.10% of the score is determined by the factor that whether you have applied for new credit accounts. It is important to apply for new credit to rebuild credit score after bankruptcy make sure to keep the account balances to minimum. Lenders will consider you to be an extreme risk if you apply for too many new credit accounts in a short span of time.
To sum it up,
A bankruptcy reflecting on your credit report can definitely hurt your credit score badly, but as you take the necessary steps to rebuild your credit and be more responsible in handling your finances, bankruptcy will have very less impact on your credit score as eventually it will drop off from your credit report.
What you can do is take certain measures to increase your credit score and this you can do by managing your existing credit well which can gradually increase your credit score and make your financial situation better despite a bankruptcy showing on your credit report.
Chapter 13 bankruptcy
Chapter 13 bankruptcy can stay on your credit report for a period of up to seven years. The debts that come under bankruptcy are shown in a very different manner in your credit report. Even if the debts associated with bankruptcy have been completely paid off .These paid off debts do not drop off from your credit report and continue to reflect on your credit report for a period of 7 years
Chapter 7 bankruptcy
A chapter 7 bankruptcy stays on your credit report for up to 10 years. Usually the debts associated with chapter 7 bankruptcy get settled within a few months after filing for bankruptcy, so they should clear off from your credit report before the expiry of the bankruptcy. But the paid off debts are dropped off from the credit report only after completion of 7 years.
However as the debts get older, they have less impact and significance on your credit score.
HOW TO REPAIR CREDIT AFTER BANKRUPTCY
Certain measures have been listed below that can help in credit repair after bankruptcy
KEEP A TRACK OF YOUR CREDIT SCORE
It is very important to check your credit score regularly particularly after filing for bankruptcy. Make a list of all the debts that are associated with bankruptcy and check their status regularly after every few months once the debts have been cleared.
START THE PROCESS TO REBUILDING YOUR CREDIT AS SOON AS POSSIBLE
Whether you have filed for chapter 7 bankruptcy or chapter 13 bankruptcy. It will clear off from your credit report after a period of 7 years or 10 years. In case none of your accounts are open for a period of more than 10 years, then you will have no credit history and zero credit which will make it difficult for you to get any approval for loans by the lenders in the future.
Therefore. It is very important for you to start building your credit soon after the bankruptcy has been discharged from your credit report to rebuild your credit score and credit history.
-get a secured credit card-In case of secured credit cards you are required to give the credit card issuer a lump sum amount of money as a collateral security and you are issued a credit card by the company with a credit limit equivalent to the amount of collateral security given by you to the credit card issuer. These cards have membership fees so read the application form carefully before applying for the card. Secured credit cards are easier to get as compared to the normal credit cards, as the lender is at no risk in granting the credit to you.
Get a car loan-Getting a car loan is very much easier as compared to other loans in case you can make a large amount of down payment.
KEEP YOUR OLD ACCOUNTS OPEN
Older accounts can help improve your credit scores even after declaring bankruptcy. Length of your credit/payment history which makes up to 15% of your total credit score is not affected by bankruptcy. The only way to maintain the length of your credit history is to keep your old credit accounts open and active.
AVOID APPLICATION OF NEW CREDIT ACCOUNTS
In the computation of your credit score.10% of the score is determined by the factor that whether you have applied for new credit accounts. It is important to apply for new credit to rebuild credit score after bankruptcy make sure to keep the account balances to minimum. Lenders will consider you to be an extreme risk if you apply for too many new credit accounts in a short span of time.
To sum it up,
A bankruptcy reflecting on your credit report can definitely hurt your credit score badly, but as you take the necessary steps to rebuild your credit and be more responsible in handling your finances, bankruptcy will have very less impact on your credit score as eventually it will drop off from your credit report.
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