7 Facts to Know About Your Credit Score After Bankruptcy – And How to Get Debt Free Fast Skip to main content

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7 Facts to Know About Your Credit Score After Bankruptcy – And How to Get Debt Free Fast

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Seven facts about credit score after bankruptcy

Image Source: Flickr User Andy Maguire

If you’re living paycheck to paycheck, dealing with debt collection calls, and unable to save money, that’s a problem. But many North Carolina consumers continue to stay stuck in debt because they’re not sure where to turn for relief – and are scared that bankruptcy will wreck their finances. In fact, it’s just the opposite. Here are seven facts to know about your credit score after bankruptcy.

#1 Your credit Score may continue to drop if you can’t conquer your debt

If you’re maxed out on credit cards and paying bills late, your credit score will take a hit every month that negative items are reported to credit agencies. If you're paying all your minimum bills while maxed out on plastic, your score will keep dropping even if you’re not late on payments. That’s harsh, but the system punishes you for fully utilizing credit lines.

#2 Your credit score will drop initially when you file bankruptcy

What's definitely true about filing for bankruptcy is that when you first file, your credit score will take an initial hit. With Chapter 13, your score can stay lower for longer because you’re on a payment plan that keeps balances owing. With Chapter 7, you’ll see a faster rebound since much (if not all) of your unsecured debt will be wiped out within a few months of filing your bankruptcy petition.

#3 Your credit score will not magically repair itself after bankruptcy

Like most things in life, if you want a good result, you have to work at it. This is true with your credit score after bankruptcy, too. You can’t just file bankruptcy and expect your FICO score to bounce back on its own. You'll have to make sure your bankruptcy is properly reflected on your credit reports – all three of them – and then take specific steps to get the credit score you want and need.

#4 The higher your score before bankruptcy, the more it may drop after you file

Typically, the higher your credit score, the more points it will drop when you file bankruptcy. For example (but not as a rule), if you have a credit score of 750 or more, your score might drop as much as 100 points. If your score is already troubled and in the 500s, it may drop fewer points but the end result is still low. However, once you file, you can immediately start to improve your score.

#5 Your credit score should improve more the harder you work on it

To get a better credit score, you have to want a better credit score and work at making it happen. You can take specific steps to encourage it to rebound. Cleaning your credit report of errors is the first step, along with paying your bills on time. From there, get secured credit cards and using them wisely, then transition to unsecured cards. It’s a process.

#6 Your credit score should NOT be ruined for a decade after bankruptcy

Doomsayers would tell you that filing bankruptcy ruins your credit for a decade. That’s not true unless you make it true. The bankruptcy will stay on your credit report for 7-10 years, but the more time has passed since the filing, the less impact it will have on your score – so long as you are working hard to reestablish your credit, using credit wisely, keeping utilization low, and always paying your bills on time.

#7 Your credit score may rebound faster with bankruptcy than without

If you are stuck with debt you can’t afford, late on bills, maxed out on credit limits, and racking up interest charges and fees every month, it can be hard to dig out and harder still to improve your score while excess debt is still an issue. Chapter 7 bankruptcy gives you a clean slate, and you can start to rebuild your score immediately. Chapter 13 takes longer but can be better than wallowing with no solution.

To find out more about improving your credit score after bankruptcy, check out the helpful information at Credit Score Keys.

To find out more about getting out of debt using bankruptcy, contact the Law Offices of John T. Orcutt for a free North Carolina bankruptcy consultation. Call +1-919-646-2654 now for a free consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington .

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