How Long Does it Take to Rebuild My Credit After Bankruptcy?

One of, if not the biggest, misconception about bankruptcy is that it destroys your credit score for good. This is simply not the case. There are several different factors that affect your credit score after you file, but none of them are permanently damaging. Here you will find what exactly happens to your credit once you file, and how your credit score can be improved in time after your bankruptcy.

How Long Does it Take to Rebound From Bankruptcy?

After filing for bankruptcy, the most important thing to note is that time is on your side. Immediately after bankruptcy, you may only be able to see slight improvements in your credit, but continuing to make on-time payments will gradually increase your score piece by piece.

As time goes on, banks, landlords, and lenders will be more willing to work with you once you are further separated from the bankruptcy. So do not give up hope after filing; bankruptcy is only the first step in gaining financial freedom. Once your debts are no longer a burden, you absolutely have the ability to remain debt-free.

Which Bankruptcy Did You File?

The impact made on your credit score is also affected by the type of bankruptcy you file.

After filing a Chapter 7 bankruptcy, your credit score will be available 90-120 days after you receive a discharge. The average credit score about 2-3 months after filing for Chapter 7 tends to initially go down about 100 points and will hover around 500-550 for most consumers.

After filing a Chapter 13 bankruptcy, your score will also become available after 90-120 days after your discharge, and following your 3-5 year plan. There will still be a drop in your credit score, but it will not be as severe as a Chapter 7 discharge.

After filing for bankruptcy, here are some credit score statistics to keep in mind:

• Within one year of filing, 43% of debtors had a credit score of 640 or higher
• Within two years of filing, 65% of debtors had a score above 640

These statistics show when good habits are put into place after filing for bankruptcy, it is more than within reach to build up your credit, even after seeing an initial dip.

Healthy Financial Practices to Rebuild Your Credit Score

Following the discharge provided by the bankruptcy, it then falls on the debtor to rebuild their credit score. Taking the time to instill solid financial habits after bankruptcy is one of the best ways to raise your score. Here are some tips:

• Open a secured credit card – these are almost always available to recent bankruptcy filers and can help raise credit scores when used responsibly with timely payments.
• Do not be quick to borrow money – simply focusing on making on-time payments to existing loans and credit cards is one of the easiest ways to rebuild credit.
• Car financing – it is possible for Chapter 7 filers to finance a car the day after they file, and Chapter 13 filers can sometimes finance during the term of their payment plan. If allowed to do so, staying consistent with payments is the key to raising your credit score through vehicle financing.

There is no quick fix for raising a credit score. There are many factors that tend to be out of your control, such as a lender refusing to work with you. The above, however, are steps that you can take to raise your score.

Staying consistent and being patient are the keys. Over time, the continual on-time payments will get your score where you want it to be, and you will finally find financial freedom.

Contact Our Los Angeles Bankruptcy Team Today

The road to financial independence can be long and stressful. At SM Law Group we understand what it takes to get rid of debt for good, and we are committed to helping you do just that.