Your Credit Could Recover From Bankruptcy More Quickly Than Expected
Many people hesitate to file for bankruptcy because they’re worried about the damage to their credit ratings. It’s true that a credit score can decline by as much as 200 points after bankruptcy. However, by delaying a bankruptcy filing, you could face an even worse credit rating, and it may be possible for your credit to recover from bankruptcy more quickly than you may expect. Contact a bankruptcy lawyer for more information.
How Long Does Bankruptcy Information Stay on Your Credit Report?
In general, a bankruptcy remains on credit reports for 10 years. It’s true that the public record for a filing of Chapter 13 personal bankruptcy remains on the report for 10 years, but many underlying references are reported for only seven years. When those items fall away, people will begin to see a substantial increase in their credit ratings. The items removed after seven years include the following:
- Credit card listings that announce that an account was included and discharged in bankruptcy
- Judgments, tax liens, and other debts discharged in the bankruptcy
- All public record items related to a Chapter 13 bankruptcy
How Long Will You Have Poor Credit After Bankruptcy?
You can expect a big drop in your credit rating after bankruptcy even if you’ve been dealing with late payments or unpaid items. However, through managing your credit well, you can start to recover more quickly than you might expect. In fact, you could enter the range of a good credit score (700 to 749) only four or five years after bankruptcy.
As we have reported earlier in this blog, a recent study by the New York Federal Reserve Bank showed that a year and a half after bankruptcy, people who were able to get back on their feet financially by discharging debt had better credit scores and better access to credit than comparable people in financial distress who did not file bankruptcy.
How Can You Get a Credit Card After Bankruptcy?
One of the first options for a credit card after bankruptcy is a secured credit card. These cards require a deposit to be made to open the account. While the security deposit provides the limit for the card, a secured credit card bills every month like a regular credit card and reports to the credit bureaus. By maintaining regular activity, low utilization, and on-time payments following bankruptcy, you can offset some of the negative items on your credit report.
There are other types of secured loans that can also help rebuild your credit and may be available more quickly after bankruptcy. These include CD loans, passbook loans, and credit builder loans. Like a secured credit card, they require a deposit or collateral, but they report to the credit bureaus and help you improve your credit.
After you’ve established credit with secured cards or loans, you can move on to traditional credit cards. While cards aimed at customers seeking to rebuild their credit may be the first ones available to you, keeping the guidelines in mind of low utilization and on-time payment can help improve your credit more quickly. In addition, you’ll want to refrain from opening too many accounts in order to avoid red flags about potential debt.
How Can You Make Sure Your Credit Report Is Accurate?
It’s important to ensure that you’re working from a correct baseline. When you’ve gone through bankruptcy, you’ll want to regularly review your credit report and score in detail. While there will be a number of accurate negative items, removing and challenging inaccurate items can help improve your credit rating. Some such items may include:
- Duplicate items that list debts sold to collection agencies
- Debts discharged in bankruptcy but listed as currently delinquent
- Judgments and public record items discharged in bankruptcy but listed as outstanding
You can find debt relief and a new look toward your financial future through a bankruptcy filing. The process can be confusing and worrisome, but a bankruptcy lawyer can provide guidance. Contact Neuner & Ventura LLP in Marlton today at (856) 596-2828 or use our online contact form. We offer each client a free initial consultation for all bankruptcy and debt-relief matters and have evening and weekend appointments available to fit into busy schedules.