Will My Credit Score Increase When Bankrupty Is Removed?

Bankruptcy gets rid of your financial obligations, but at a high cost to your credit rating. The Privacy Rights Clearinghouse explains that court actions such as judgments and bankruptcies factor into your payment history, which is a big part of your score. Most bad entries on your credit reports, including bankruptcy, eventually get erased and stop pulling your score down.

Removal

Your bankruptcy gets removed from your TransUnion, Equifax and Experian credit reports after 10 years. The removal process is automatic, and your credit score goes up afterward because bankruptcies hurt credit scores. Chapter 7 and chapter 13 bankruptcies are the most common consumer filings, and both are blemishes on your reports. The FTC explains that Chapter 7 means liquidating all assets and getting out of all bills, while Chapter 13 involves a partial payment plan and retention of many assets.

Confirmation

Check your credit reports at the 10-year mark and file disputes with the credit bureaus if your bankruptcy is still in their files. AnnualCreditReport.com gives out free reports once per year from TransUnion, Equifax and Experian. The three bureaus allow online disputes on their individual websites if your bankruptcy still shows up after the allowable decade. The Fair Credit Reporting Acts forces them to investigate the mistake and erase the outdated information.

Damage Control

Your credit score can be raised while bankruptcy is on your record if you focus on the other factors that have a big effect on your credit score. Your payment dates and the amount of debt you carry are both major factors, according to the MyFICO credit scoring website. Get a secured credit card soon after your bankruptcy, use it sparingly and pay every payment before the deadline to raise your score. Pat Curry of Bankrate.com explains that people with low credit scores qualify for secured cards because the cards require a monetary deposit for collateral.

Considerations

Bankruptcy is not always a huge detriment to your credit score. It usually lowers the number, but its effect is minimal if your credit is already badly damaged. Smart Money writer Aleksandra Todorova advises that sometimes bankruptcy actually pushes your score up because it removes long-term delinquencies, charge-offs and other harmful data. The scoring companies compare you to others in similar financial circumstances, which also helps your rating. Your slate is not cleaned, even when bad items are removed, because the bankruptcy itself still looks bad to lenders.