Credit Score After Bankruptcy


If you recently filed for bankruptcy, or are thinking about doing so, know that it is considered a “very negative event,” according to Fico, the founder of the almighty Fico score.

In other words, your credit score will be severely damaged if you file for bankruptcy. The big question, though, is how much it will actually fall.

This is where things get a little tricky, as it really depends on your unique credit profile.

Your credit score could fall just 100 points or as many as 300, depending on the situation.

But in any case, you’ll probably end up in the same place.

For example, a consumer who already has a bunch of negative information on their credit report won’t see as big of a fall as another person who already has a ton of delinquent accounts.

More often than not, a consumer filing for bankruptcy will already have a deflated credit score for reasons I just mentioned. Most consumers don’t throw in the towel without a fight, and most “fights” don’t come without a few bruises.

In other words, someone pushed to the brink of bankruptcy will likely have missed payments, collections, and charge-offs, so their credit score could already be considered a poor one.

So if someone has a 720 credit score and another borrower has a 600 credit score prior to the bankruptcy filing, both scores could wind up around 500.

But the first consumer in our example would see their score drop 220 points, while the second consumer would see their score fall just 100 points.

This is simply because the second consumer’s credit problems have already been factored in somewhat.

The number of accounts included in the bankruptcy also matters. Put simply, if everything on your credit report is included in the filing, expect your credit score to drop more.

How Long Bankruptcy Shows Up on Your Credit Report

You may also be wondering how long that nasty mark will appear on your credit report.

Both Chapter 11 and Chapter 7 bankruptcies will remain on your credit report for 10 years from the date filed.

For a completed Chapter 13 bankruptcy, that time period is just seven years.

Individual accounts included in the bankruptcy filing should fall off your credit report after seven years, at which point they won’t be causing any more damage to your credit scores.

Also keep in mind that over time, the impact of the bankruptcy will have less and less impact, like any other negative scoring event.

How to Fix Things After BK

The key after filing bankruptcy is re-establishing your credit. In short, this means getting new lines of credit and making on-time payments.

It’ll be difficult to regain trust, but making each and every payment on time will build positive credit history over time.

It won’t happen overnight, but in a few years, you’ll be able to get your credit score back to “respectable” status.

And before long, you’ll be able to get your hands on credit cards, auto leases/loans, and even a mortgage!

See also: Foreclosure vs. short sale on credit score