Will I have bad credit forever after filing bankruptcy?

In today’s society, your credit score can play a large role in your life. It often comes into play when you make large financial decisions, such as when you rent or buy a house, purchase a car or apply for a loan.

This critical role is one reason why many people worry about maintaining and improving their credit scores throughout their life. It is also why many people struggling with serious debt might avoid seeking debt relief.

It is common to hear troubling accounts and myths about how filing bankruptcy will destroy your credit and your financial future – but is this true?

How does bankruptcy impact my credit?

First, it is important to know that regardless of the type of bankruptcy you file, you will not struggle with bad credit forever.

It is true that filing bankruptcy can affect your credit and your credit score. While there is no way to know for sure how bankruptcy will impact your individual credit, generally, your score could decrease by several hundred points depending on what your credit score was before filing bankruptcy.

Additionally, bankruptcy often continues to impact your credit for as long as it remains on your credit report, which is:

  • 10 years for Chapter 7 bankruptcy
  • Seven years for Chapter 13 bankruptcy

This might seem overwhelming. However, it is critical to note that these effects are not permanent.

You can overcome short-term effects and build up credit again

Filing bankruptcy will doubtlessly impact your credit – but you can take action almost immediately after your discharge to increase and improve your credit score. For example, you can:

  • Obtain and use a secured credit card
  • Follow a careful budget to keep costs manageable
  • Ensure you pay loans and bills on time

All of these steps will help to develop your credit once again.

You can qualify for a mortgage within 2-3 years after a bankruptcy filing

You can qualify for a mortgage after a bankruptcy filing.  However, most traditional mortgages have a 3-year bar after receiving a bankruptcy discharge.  Some, like V.A. loans, have a 2-year bar after receiving a bankruptcy discharge.

It will require a strategic approach to rebuild your credit after receiving a bankruptcy discharge, but it is possible to recover fully and move forward into a promising financial future.