What happens to your credit score after the Chapter 13 bankruptcy is abolished? In most cases, filing for Chapter 13 bankruptcy will have an impact on your credit rating for up to five years. After your discharge from Chapter 13 bankruptcy, there will be accounts left that were current before filing for bankruptcy, for a period of up to seven years. This can have a potentially negative effect on your credit rating. Even though your Chapter 13 bankruptcy waiver may be fully complete, your credit rating can still increase by 50 to 150 points after the bankruptcy is removed from your credit report. Removing bankruptcy can have a dramatic effect on your credit rating since it is the most negative element that can appear on your credit report.
The exact number of points your credit score will increase depends on other items you have in your credit report. Lending Tree conducted an analysis of the credit scores, loan approvals and interest rates of more than one million applicants, some of whom had bankruptcy in their credit histories and others who did not. The company found that 43% of those who had filed for bankruptcy had a credit score of 640 or higher within one year. By the two-year mark, that figure had risen to 65%. Some users had achieved a credit score of 740 within one year of bankruptcy. Because your credit rating is based on information that appears in your credit reports, bankruptcy will affect your rating until it is eliminated.
This means that a Chapter 7 bankruptcy will affect your score for up to 10 years, while a Chapter 13 bankruptcy will affect your score for up to seven years. However, the impact of both types of bankruptcies on your credit rating will diminish over time. In addition, if you practice good credit habits, you may see your score recover faster. If your credit score dropped more than 100 points as a result of adding certain negative records to your credit report, it is estimated that deleting that information could result in an increase of more than 100 points. You'll receive ratings for every part of your credit rating, plus a personalized action plan designed to maximize your credit score gains in a minimum amount of time.
However, not using any form of credit at all means that there is nothing new in your credit report to restore yourself with a better track record. Having a bankruptcy in your credit history will seriously affect your ability to get any form of credit for as long as it stays on your report. But if you use any form of credit responsibly after bankruptcy, you can almost guarantee a significant increase in your credit rating after the bankruptcy is removed from your report. People who handle their finances responsibly after bankruptcy can often finance cars and open new credit card accounts soon after the bankruptcy. Since bankruptcy is obviously a negative entry in their credit report, people often assume that “bankruptcy ruins your credit for 10 years” (or seven). However, the biggest boost to your credit rating will occur after the bankruptcy is removed from your report. So people who had a rough patch during the Great Recession but used their finances responsibly since then have seen a significant improvement in their credit ratings lately.
A little less than a year ago I was able to go to a reputable dealership and, due to my research into my own credit and interest rates, I told the dealer the interest rate that was not going up and that I only wanted my credit checked once. The increase in your credit rating after a bankruptcy is removed from your report depends on several factors, but many people report increases ranging from 30 to 100 points.
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