Legally reviewed by Allen A. Kolber, Esq. - The Law Offices of Allen A. Kolber, Esq., P.C.
Key Takeaways
- The 150 to 240 point drop is not an average; it applies to filers whose credit was still strong.
- By the time most people file, their score has already fallen as far as it is going to.
- Card offers often arrive before a case closes, because you cannot file again for years.
- You will not reach pre-filing levels until the record ages off, but improvement starts sooner.
Inevitably, filing for bankruptcy will have your credit score lowered. And rebuilding your credit after a negative event, such as bankruptcy, can take some time. However, this is not to say that it cannot be done. Follow along to find out what credit score you will start with after your bankruptcy filing and how a proficient Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq., can guide you toward improving it.
What Will My Credit Score Be After Bankruptcy?
Data has shown that, on average, a credit score after bankruptcy is around 530. It’s important to understand that the often-quoted range of 150 to 240 points is not an average drop, and treating it as such is where most people go wrong. Generally, the amount your credit score drops will depend heavily on how high it was to begin with, as a strong score has further to fall, and a filing contradicts more of what your score was built on.
As such, someone who files with a mid-600 score will generally lose considerably less than a filer in the 800s. Similarly, someone whose score was already low as a result of multiple missed payments may see negligible movement, as most of the damage was done prior to the petition being filed.
However, there is no specific answer for what your credit score will be after bankruptcy, as it will ultimately depend on several contributing factors. For example, the number of accounts you have open and the amount of debt you claimed in your bankruptcy filing will affect your score.
Your Score Has Typically Fallen Before You File
This is the area most advice skips. By the time someone reaches out to an attorney, they have typically gone months without paying credit cards or mortgages, and may already face judgments or a foreclosure action. Every one of these events has already been reported. The score is at or near the lowest point it has been, and the bankruptcy itself is the last mark, rather than the first. That is why the frightening numbers you read about apply mostly to individuals who file while their credit is still high, which is not most filers.
Whether You Complete Your Case Matters Too
In addition to your open accounts and the amount of debt that is listed, your starting score will be influenced by how the case ends. A Chapter 13 case that runs through to discharge will be treated differently from one that is dismissed partway through, and it will also leave your report sooner.
How Soon Will My Credit Score Improve Following Bankruptcy?
Notably, how soon your credit score will improve after bankruptcy will largely depend on what type of bankruptcy you filed. This is because different types of bankruptcy will stay on your credit report for different amounts of time. Examples of such are as follows:
- A discharged Chapter 13 bankruptcy: this may remain on your credit report for around seven years from the date of your filing.
- A non-discharged Chapter 13 bankruptcy: this may remain on your credit report for around 10 years from the date of your filing.
- A Chapter 7 bankruptcy: this may remain on your credit report for around 10 years from the date of your filing.
There is one narrow exception that filers should know about. Federal law establishes reporting limits, but lifts them when a report is pulled for:
- A credit transaction totaling $150,000 or more
- Life insurance of that size
- A job paying $75,000 or more annually
In these situations, bankruptcy can legally be reported past the usual window, though in practice, the bureaus rarely do.
You should not expect your score to reach its pre-filing level while the record is still on your report. What can happen much sooner is visible improvement, which typically begins within the first year of a consistent, on-time payment history.
Will Anyone Ever Lend to Me Again?
You may find that you can receive a loan sooner than you may anticipate, and the reason is unsentimental. A Chapter 7 discharge blocks you from receiving another for eight years, which makes a recent filer with no outstanding debt a lower risk than the individual was a month before they filed. In fact, card offers often arrive before a case has even closed.
However, you should treat these offers carefully rather than desperately, as the terms and conditions attached are generally poor, though they can act as a signal that the door to credit is not shut. In fact, some lenders also look more favourably on a completed Chapter 13 case over Chapter 7, as Chapter 13 involves a completed repayment plan.
How Can I Improve My Credit Following a Bankruptcy Filing?
Before your discharge you must complete a debtor education course from a provider approved for your district, and it covers much of this ground. It is worth treating as useful rather than as a box to tick.
Overall, if you maintain positive habits for the year following your bankruptcy filing, you may be able to bring your score to the “fair” range. Below is an example of one approach you may be able to take to rebuild your credit:
- After completing the bankruptcy process, apply for and open a new secured credit card.
- Use your new secured credit card in a responsible manner.
- Pay off your new secured credit card in a timely manner.
- Within a month, monitor your credit score to check for any improvements.
Contact an Experienced New York Bankruptcy Attorney
The bankruptcy process can be incredibly overwhelming, which is why it’s critical to understand that you do not have to navigate this process alone. At the Law Offices of Allen A. Kolber, Esq., P.C., we can help you from the moment you file. If you want more ways to improve your credit, do not hesitate in consulting with a talented Rockland County bankruptcy attorney. Contact us today.
