How Does Chapter 7 Bankruptcy Affect Your Credit Rating?

It may seem counter intuitive, but usually a Chapter 7 bankruptcy will ultimately result in an improved credit rating because the debtor gets a fresh start, cash flow is improved when old debts are discharged, and the debtor is finally able to stay current with debts as they come due. The credit reporting agencies notice the change in conduct, and their ratings improve accordingly.

In fact, after the conclusion of your case, and sometimes right in the middle of it, you will get notices from companies that specialize in giving credit to people who are exiting bankruptcy. The key is to use the credit prudently and pay it off promptly. Some people say after bankruptcy they do not ever what to see another credit card. But to rebuild your credit rating you must obtain and use credit.

If you do a Google search, you will find websites dedicated to repairing your credit rating. You do not need to hire anybody or pay anybody for help.

After bankruptcy, it is advisable to check your credit report to make sure your old debts are noted as discharge and no longer owing. They should read as having zero balances. Note that a charge-off by the creditor is not the same as discharge. That means the creditor has internally decided not to try to collect the debt, but they reserve the right to change their mind.

The fact that you filed bankruptcy will be on your credit report for ten years. However, if you start paying your bills on time, the credit rating agencies will note that your credit worthiness has improved.

Also, be aware that you can challenge the inaccuracy of any information on your credit report. If the credit reporting agency cannot verify the accuracy of the information, they must delete it pursuant to federal law, the Fair Credit Reporting Act. The three major credit reporting agencies are Equifax, Experiean, and Transunion. Use of a search engine will quickly locate websites for each credit reporting agency.