If you declare a Chapter 13 bankruptcy, it remains on your credit record for 7 years. A Chapter 7 bankruptcy will leave its mark on your credit history for even longer: 10 years. In either case, your credit score will plunge and you will find it difficult to get any form of credit during that time. However, while a bankruptcy can deal a devastating blow to your creditworthiness, the effects do not have to be long-lasting.
While a bankruptcy filing will remain on your record for the full legal term, you can begin to diminish its effect the day after it is filed by adopting good habits with your credit and not biting off more than you can chew. Here are a few things that you can do to help raise your score and build good credits after bankruptcy.
First, there are two forms of credit you will need to rebuild if you have filed for bankruptcy. Those are:
1. Revolving credit, such as a credit card or home equity line of credit;
2. Installment loans, such as an auto loan, student loan or even a mortgage.
Even if you do not qualify for a regular, unsecured credit card, it may be a good idea to acquire a secured card, based on an amount that you put on deposit with a bank. Typical limits of a secured card can be $200 to $500. However, the point is to establish a history of good credit use which will help raise your score. If you keep your balance at less than 30% of your credit limit, and pay off your balance in full each month, your credit score will begin to improve again within a matter of months.
Similarly, if you still have a car loan or student loan after your bankruptcy, regular on-time payments on those will help raise your score, and pay over the minimum payment whenever possible. An honest effort to pay down your existing is one of the best ways to bring your credit rating back up.
You might also consider getting a copy of your credit report and checking to make sure that there are no errors, such as accounts that are still considered open and overdue, even though they were closed as part of your bankruptcy. If those are on your credit report, you will need to contact the three major credit bureaus and request that those items are reported as “included in bankruptcy.”