How Long Will Bankruptcy Affect Your Credit Report and Score?

If you've filed for Chapter 7 or Chapter 13 bankruptcy, the bankruptcy will stay on your credit report for up to ten years. If you apply for a loan of $150,000 or more, that creditor may see the bankruptcy for even longer than ten years.

How the bankruptcy will impact your credit report and credit score depends on your credit prior to filing for bankruptcy and the actions you take to rebuild your credit after bankruptcy. Some will see their credit return to normal shortly after discharge, others may take more time to rebuild their credit.

Factors Determining the Impact of Bankruptcy on Your Score

Your score prior to bankruptcy. Much depends on how bad your score was before entering into bankruptcy. According to Fair Isaac (the maker of the FICO score), if your credit was great prior to bankruptcy, the bankruptcy filing will cause your score to plummet. However, if your score was low prior to bankruptcy, the bankruptcy will cause only a modest drop in your score.

Number of accounts in the bankruptcy. The more accounts that you list and discharge in your bankruptcy, the bigger the impact on your score.

Chapter 7 vs. Chapter 13. Fair Isaac says that Chapter 7 and Chapter 13 generally have an equally detrimental effect on your credit score.

How You Can Minimize the Impact of Bankruptcy on Your Score

For some people, filing for bankruptcy allows them to get on the path to financial recovery more quickly than if they struggled under a mountain of debt without filing for bankruptcy. If you begin taking steps to rebuild your credit, then you may be able to improve your score in a reasonable amount of time.

According to Fair Isaac, the two most important factors in your credit score are (1) making payments on time, and (2) not using most of your available credit. To learn how to improve your credit report and score after bankruptcy, see our section, After Bankruptcy.

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