How Long Does Bankruptcy Stay on Your Credit Report
Filing for bankruptcy is a long-term commitment. Whether you’re filing for a Chapter 13 bankruptcy that sets you up on a payment plan or a Chapter 7 bankruptcy, which liquidates your assets in order to discharge your debts, it will leave a scar on your credit report for years.
The good news is that as far as your consumer credit report is concerned, this is a scar that heals. It may take a long time for your bankruptcy to fall off of your credit report, but it won’t be there forever.
- Chapter 7 bankruptcy can stay on your credit report for up to 10 years.
- Chapter 13 bankruptcy typically falls off your credit report after seven years.
- Over time, bankruptcies that appear on your credit report will have less of an effect on your overall credit score – even before they fall off.
Chapter 7 bankruptcy stays on your report for 10 years
Chapter 7 bankruptcy stays on your credit report for 10 years. The clock starts ticking on the day you file your order of relief, so you can start counting from the beginning of the process rather than the end.
Filing for bankruptcy doesn’t magically erase the debts included in your bankruptcy case from your credit report, even after they’re officially discharged. Those negative line items will still show up on your credit report for seven years after the first day they were reported late, alongside the bankruptcy filing. That means they’ll fall off your credit report before the bankruptcy, but not because you filed for bankruptcy.
Chapter 13 bankruptcy stays on your report for 7 years
Legally, the credit bureaus are allowed to keep a Chapter 13 bankruptcy on your credit report for 10 years. In practice, though, each of the big three bureaus has agreed to a policy that removes Chapter 13 bankruptcies after just seven years.
Your seven years will start from the date you file your order for relief. A Chapter 13 bankruptcy sets you up on a three- to five-year payment plan rather than releasing you from your debts entirely. The late payments on your debts prior to your bankruptcy will continue to stay on your report for up to seven years after you were initially late.
NOTE: Credit bureaus still keep information on file even after it’s fallen off your credit report. There are a couple circumstances where your bankruptcy could be reported when your credit is checked after the full 10 years. If you’re applying for a job that pays more than $75,000 per year, or if you’re applying for a credit line or life insurance policy of $150,000 or more, the bankruptcy can show up after that timeline.
How does bankruptcy affect your credit score?
Initially, bankruptcy is likely to have a noticeable negative impact on your credit score. The extent of the drop can vary depending on your score before you filed for bankruptcy. If your score was low to begin with, you may not notice the impacts as much as you would if you started with a higher score.
Over time, the intensity of bankruptcy’s impact on your credit score does wane, especially if you’re simultaneously making efforts to build up positive line items on your credit report.
How to remove a bankruptcy from your credit report
If the bankruptcy listed on your credit report is accurate, you can’t get it removed. You will have to wait the full seven to 10 years for it to fall off. However, if you’re past the appropriate window, you can dispute it. You can also file a dispute if there’s a bankruptcy listed on your credit report inaccurately.
You will have to file a dispute with each of the three credit bureaus. For the most part, the easiest way to file a dispute is online, though the exact process does vary slightly from bureau to bureau.
You can learn more about filing a dispute with each of the three credit bureaus here:
LendingTree Spring tracks your credit score for you — and you may notice your score tick up after your bankruptcy falls off your report depending on the rest of your credit history. You can also check your full report from each of the three credit reporting bureaus once per week for free at annualcreditreport.com.
How long does it take to rebuild your credit after bankruptcy?
The amount of time it takes to rebuild your credit after bankruptcy varies depending on your personal situation. For example, in LendingTree’s bankruptcy study of consumer credit scores, those with lower credit scores typically saw an average credit score increase of 69 points after just one month. That’s not the case for everyone, though. The highest point drop observed was 193 points after one month. The higher your score, the more likely it is to fall.
Longer term, scores tend to drop more universally. Between the first two months after filing bankruptcy and the first one or two years, the average credit score drop is 30 points. After that, the average score drops another five points by year five.
This phenomenon isn’t caused by the bankruptcy itself but rather by the underlying factors that led to the bankruptcy. Whether that’s difficult socioeconomic circumstances or poor spending habits, the reason there is a point drop longer term is typically because these consumers are once again taking on too much debt. Building good financial habits can help prevent these kinds of drops.
How to improve your score after bankruptcy
- Keep old credit accounts open. This is easier to do with a Chapter 13 bankruptcy than a Chapter 7 bankruptcy, but if you have the option to keep an account open, it’s often advisable to do so. That’s because the length of your credit history makes up 15% of your FICO Score.
- Increase your credit limit. Your credit utilization ratio makes up 30% of your FICO Score. This ratio is calculated by dividing how much you owe across all accounts by the credit available to you across all accounts. As long as you don’t keep borrowing money you can’t afford to pay back, increasing your credit limit could lower your ratio, which could then improve your score.
- Make all of your payments on time. A positive payment history makes up a whopping 35% of your FICO Score. It is the single most important factor as you work to improve your credit score. That means if you don’t make payments on time, it could negate the efforts you’ve made by keeping old accounts open and increasing your credit limit.
- Mix up your credit. While it only accounts for 10% of your FICO Score, having a good mix of credit products on your report could help. You’re aiming for a healthy mix of revolving accounts (like credit cards) and installment loans (like a mortgage or auto loan.) If you pursue this route, remember that on-time payments are the most important factor. If you take on new debt you can’t afford, it can do more harm than good.
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