The Impact of a Bankruptcy on My Credit Report

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Managing your credit is an important part of managing your finances. In many situations, individuals need to file bankruptcy. If you do, you may know that this action can help you to get out from under a debt burden but it also places a black mark on your credit file for up to ten years. During that time, it can be much more difficult for you to obtain credit. Because of this, individuals who are just considering the use of bankruptcy should carefully consider their options and determine if it is the best overall outcome.

What Is The Risk?

Once you file a bankruptcy, check your credit report. You will notice a public record being reported there. This public record will remain on the account for up to ten years. During that time, several things will happen any time you apply for credit, request a loan or otherwise give access to your credit report. A credit report with a bankruptcy indication can raise flags for consumer lenders.

However, with the proper use of credit after you file, you could see your credit score rise up into the 700 once again. One study indicates that most consumers can use strategic credit usage during the years after filing bankruptcy to position themselves in the 700 range (which is considered a good credit score) within two to three years. However, before you do this, it is important to know a few things about your bankruptcy and your credit report after you file.

  • After a bankruptcy, lenders will know that you are a bigger risk to them then other borrowers because they believe past usage is an indication of future usage.
  • Because you cannot file bankruptcy again for eight years or six if you are filing Chapter 13, lenders also know that you are stuck with them for several years before becoming eligible again. In other words, lenders are willing to lend to you after you file.
  • Get a copy of your credit report free and ensure that all accounts you included in the bankruptcy have a zero balance. That way, they are no longer negatively impacting you. 
  • Before you can learn how to credit report repair your credit report, know that you should be avoiding false claims by companies that promise to remove a lot of information from your file. It is rarely possible.

After bankruptcy, work to use credit wisely especially any loans that made it through the filing such as auto loans and mortgages. It is also important to keep a watchful eye on your credit file to ensure information is accurate. In many cases, you will pay more in interest and fees after a bankruptcy but in the long term, you could be better off if that debt burden was significant.

 

 

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