Posted on: 9 December 2015Share
After making the big decision to file for Chapter 7 bankruptcy, you may want to begin looking for ways to rebuild your credit. If you do this shortly after your bankruptcy is complete, you will have a good chance of building your credit score back up in a very short amount of time. There are two things you should know about this.
How Long Will Chapter 7 Affect Your Credit Score?
The bad news about filing for Chapter 7 bankruptcy is it will remain on your credit report for 10 years from the time it was filed. On your credit report, your bankruptcy will be listed as a derogatory item, and it is typically listed under a section labeled, "Public Records."
There is virtually nothing you can do to get this off your credit report, except wait. While it is on your credit report, it will remain listed as a derogatory item for the entire 10 years. This means that it can pull your credit score down for an entire decade. While there is nothing you can do to remove it, there are things you can do to help your score go up.
How Can You Make Your Score Go Up?
As soon as you file for bankruptcy, you will see a sharp decrease in your credit score. This drop can be as much as 100 to 200 points, which is very significant considering the scale only goes up to 850. To make your score go up after bankruptcy, you should first learn what factors affect credit score. Here are three main factors:
- Payment history – You may suddenly lose the payment history of many of your accounts once you file, and payment history is worth 35% of your credit score. To start seeing an increase, apply for a secured credit card or get an auto loan. Make all your payments on time, and this will begin helping you rebuild your credit history.
- Your balances – The good news with bankruptcy is that it will wipe away balances of credit cards and medical bills, and the balances you owe makes up 30% of your credit score. To rebuild your credit, get several credit cards and use them for small purchases. Each month, pay the balances off in full. This will show you have a low credit utilization rate, which is very important for your credit score.
- Length of credit history – 15% of your credit score is made up by the length of your credit history. The faster you can begin rebuilding your credit history, the faster your score will increase.
If you would like to learn more about bankruptcy and its effects, contact a bankruptcy lawyer in your area and schedule an appointment.