How To Improve Your Credit Score After A Chapter 13 Bankruptcy
Richard Fonfrias, J.D.
Chicago's Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC
Your credit score is also called your FICO score, which stands for Fair Isaac Corporation. Originally, this company created the model that took data from your credit report and turned it into a score that was commonly used by mortgage companies. Today, your score is used by all types of companies that use credit bureau services to determine your credit-worthiness.
Chapter 13 bankruptcy is commonly referred to as reorganization bankruptcy, which allows you to reorganize your debts and submit a repayment plan to the bankruptcy trustee for approval. Once approved, you have between three and five years to repay some or all of your debts under this court-supervised plan. This differs from Chapter 7 liquidation bankruptcy, in which your assets are sold and the money is paid to your creditors in hopes of satisfying all or as much as possible of your debt.
How These Types of Bankruptcy Affect Your Credit Score
Chapter 13 Bankruptcy can stay on your credit report for (1) seven years from the date of discharge, or (2) not more than ten years from the filing date if it has not been fully discharged.
Chapter 7 Bankruptcy can stay on your credit report for up to ten years.
This means Chapter 13 will fall off your credit report sooner than Chapter 7 as long as you completed your court-ordered repayment plan.
How to Improve Your Credit Score After Filing for Bankruptcy
While you work to raise your credit score, keep this in mind: Your bankruptcy filing will do the most damage to your credit score right after it reaches your credit report. It will have less of an effect the longer it stays on your credit report. This means the amount of damage your bankruptcy filing will do to your credit report will go down as time passes. So you can take steps to raise your credit score after your Chapter 13 bankruptcy, even while it remains on your credit report.
Here's one more thing to keep in mind: The amount you improve your credit score depends on what action you take after filing bankruptcy. Here are steps you need to take:
1. Follow the bankruptcy trustee's court-approved repayment plan. If you do, the bankruptcy should come off your credit report after seven years.
2. Pay all of your bills on time, especially bills that get reported to credit bureaus, such as loans, and credit card payments. This will help you raise your credit score.
3. Evaluate your current amount of credit card debt. If you can reduce the amount of the available credit limit you're using, you will improve your credit score.
Remember, the further you are from the bankruptcy filing date, the less impact it will have on your credit score. Plus, the more you pay your bills on time and limit the amount of credit you use, the higher your credit score will climb.