After bankruptcy credit becomes a huge concern. Your credit score, or FICO score as it is also sometimes called, is one of the most valuable numbers that you have. If you have a good credit score, usually defined as anything over 700-720 on the FICO score scale (which goes up to 850), then you can get prime rates, low interest loans and borrow money almost whenever you need it. If you have a poor credit score, usually defined as 600 or below on the FICO scale, then you may either not be able to get credit at all or you may be stuck with high interest and sub-prime lenders. After bankruptcy, your credit score is probably at or closer to the below-600 range than the 700 range So, how long does bankruptcy stay on your credit report and what can you do about its presence there?
Understanding the Bankruptcy Credit Connection
Usually, bankruptcy stays on your credit report for anywhere between 7-10 years. 10 years is common. It will be displayed on your credit report for lenders to see and it will drag down that all-important three digit FICO score.
It is important for you to understand that a Chapter 13 bankruptcy tends to be less damaging than a Chapter 7 to your credit, since with a Chapter 13, you are paying back at least some of your debts during the 3-5 year payment plan you devise when you file. Either way, though, that bankruptcy judgment is going to be right there on your public records page for a long time.
During this period, it may be difficult to buy a home or a car or to get any type of loan. So, what can you do?
- If you want to buy a home, consider going to a lender who offers loans backed by the FHA or VA (if you are an eligible veteran or serviceman/woman). Because these quasi-governmental agencies guarantee the loans issued by these lenders, the lender is able to take more of a risk on a borrower with a bankruptcy. You may be able to buy a house through an FHA loan even if you do have a relatively recent bankruptcy showing up on your report, as long as the bankruptcy is two years old.
- Get a secured credit card. These cards charge a fee and require you to put collateral (cash deposits) down. However, most also report to the major credit bureaus so you can use these cards to pay on time, establish a good credit history and bring your credit score up.
Getting Help
Throughout the bankruptcy process, your experienced bankruptcy attorney can answer all of your questions, including questions about just what the bankruptcy will do to your credit score. It is very important that you have an attorney to turn to for this type of insight and guidance.
