Bankruptcy will have a big impact on your credit score in the short term. However, if you are considering filing for bankruptcy, you've probably already missed payments or are about to, which will harm your score anyway.
Working with a Chapter 7 bankruptcy attorney will help you get back on the road to a good credit score. If you're ready to file Chapter 7 bankruptcy, here's what to know about how it will affect your credit.
It Will Stay on Your Credit Report for 10 Years
Your credit score is determined by the information on your credit report. According to credit reporting agency Experian, a Chapter 7 bankruptcy will stay on your report for ten years after your initial file date.
You Can Get Credit After Bankruptcy
In most cases, people who file bankruptcy can get some sort of credit product soon afterward. However, it's worth noting that credit products for people who recently filed bankruptcy don't have the best terms. The interest rates may be high and there could be other costs, such as annual fees, that you don't see on other credit products.
You can use these post-bankruptcy credit products to rebuild your credit score. It's important to be very careful about what you sign up for. You must be able to make the payments on time so you don't end up in another tight financial situation.
Rebuild Your Credit Right Away
You don't have to wait for the bankruptcy to drop off of your credit reports to start rebuilding. First, review all of your credit reports from the major credit bureaus, which are Equifax, TransUnion, and Experian. You can get one free report per year from each bureau by visiting the official Annual Credit Report website.
Review your credit reports to make sure the bankruptcy is properly reported on all three. Dispute any misinformation on your reports, such as debts included in the bankruptcy which are not noted correctly.
If you don't want or can't afford a high cost post-bankruptcy credit product, consider getting a secured credit card instead. These cards tend to have lower costs than unsecured post-bankruptcy credit products.
With a secured card, you put a deposit down in cash on the card that usually matches the credit line. Use the card but always stay under the limit and pay it in full each month. Secured credit card companies report the card to the credit bureaus, which will help you rebuild your score and history.
Filing for bankruptcy will harm your credit for a period of time, but it also gives you a chance at a fresh financial start. Consult with a bankruptcy attorney to learn more about how bankruptcy could affect your credit and financial future.