One of the most common concerns people have when considering filing for bankruptcy is what happens to their credit when the process is over. The common misconception when it comes to credit scores is that they will be lowered beyond repair. We will explain what actually happens to your credit score after bankruptcy, and share some strategies to help rebuild your credit.
What Happens to Your Score
The fact of the matter is that there may be a drop in your credit score after bankruptcy, although some filers may not see a decrease at all. The number of points your credit score drops is tied to the chapter of bankruptcy you file for.
Your score will be available for you to view 90-120 days after you receive a discharge or your payment plan is over, but here are some of the numbers:
- Chapter 7 filers may experience a drop in score of about 100 points, and scores will sit around 500-550.
- Chapter 13 filers may also see a drop in score, however, it would not be as severe as that of a Chapter 7 discharge.
After you have received a discharge and your credit score dips, it is important to know what you can do to raise it back up.
Use Time to Your Advantage
After finishing up bankruptcy, it is important to recognize that time will always be on your side. Even though creditors and lenders may not be too keen to work with you immediately after a bankruptcy, keeping up with on-time payments will make them more inclined to accommodate you.
Here are some important credit score statistics to keep in mind:
Within one year of filing bankruptcy, 43% of filers had a credit score of 640 or higher
Within two years of filing, 65% of filers had a score above 640
Healthy Practices To Raise Your Score
Though time is on your side when attempting to raise your score, you don’t have to simply wait for a positive change. Here are some habits you can put in place to give yourself the best chance at raising your credit score.
- Make on-time payments: The tried and true way of raising your credit score is actively making sure all your payments are made on time. Though it may not result in an instant rise in score, you will be able to see steady progress in overall credit.
- Open a secured credit card account: These accounts are available to almost every recent bankruptcy filer to help raise their credit score when used responsibly and properly paid off.
- Car financing: Whether you file for Chapter 7 or 13, you may be able to finance a car during and after bankruptcy, and staying consistent with payments is the best way to keep your credit score on the rise.
- Don’t be too quick to borrow money: Do your best to focus on making your payments on time for existing loans and credit cards. This is one of the easiest methods to rebuild your credit.
- For further information about how you can improve your credit score after a Chapter 7 bankruptcy, specifically, visit our website here.
Contact Our Knoxville Bankruptcy Team Today
We understand how important your finances are to you. Our goal is to help make finding your financial freedom as efficient and cost-effective as possible.
If you have questions about how bankruptcy may be able to help you, don’t hesitate to get in touch with us today through our website or give us a call at (865) 328-7993 to schedule your free consultation!