How to Remove a Bankruptcy from Your Credit Report

Each year, scores of individuals file for bankruptcy. And unfortunately, the damage to their credit score is catastrophic. In fact, the impact is so severe that credit scores will still suffer even if the debtor has paid off what they owe.

The good news is there are ways to get a bankruptcy removed from your credit report. You can also take specific actions to start boosting your credit score right away.

Keep reading to learn more.

How does filing for bankruptcy impact your credit score?

Bankruptcies are one of the most detrimental items that can appear on your credit report. Like judgments and tax liens, they report as a public record and tank your credit score.

If your credit profile was stellar and you had a high FICO score prior to filing for bankruptcy, you should “expect a huge drop in [your] score,” according to myFICO. But if your credit was already in the trenches due to the presence of negative items on your report, you would probably “only see a modest drop in [your] score,” the article adds.

The more accounts included in the bankruptcy filing, the greater the impact on your score. Why so? These accounts will report for seven years from the original date of delinquency. And the impact is the same even if they get discharged through bankruptcy.

(Quick note: Have you recently filed for bankruptcy? Are the accounts included in the filing reported accurately? If not, send dispute letters to each of the credit bureaus to have the issue rectified. Be sure to specify which accounts are incorrect. Also, include the schedule of debt covered under the filing. And if applicable, attach any supporting documentation to substantiate your claim).

Your credit score will start to bounce back over time, and it may not take as long as you think. This is due to the fact that discharged debts are no longer owed. This means your credit utilization ratio will now be much lower. And since amounts owed account for 30 percent of your credit score, you will start to see small increases as creditors update the balances.

But if can get the bankruptcy removed from your credit report, that means good news for your credit score much sooner than later. More on that shortly.

How long will the bankruptcy remain on your credit report?

Discharge date vs. reporting timeline

The length of time that the bankruptcy reports depends on the type you file. The rules are as follows:

  • Total Discharge or Chapter 7- up to 10 years from the date of filing
  • Reorganization or Chapter 11- up to 10 years from the date of filing
  • Repayment Plan or Chapter 13- completed bankruptcies; usually takes 3 to 5 years)- up to 7 years from the date of filing

But individual accounts included in the filing report for seven years. This is the case even if you filed under Chapter 7 or 11.

Is it possible to remove a bankruptcy from your credit report?

Removing a bankruptcy from your credit report takes quite a bit of persistence. But it’s not impossible. You have two options to move forward:

Do-It-Yourself

You can dispute bankruptcies with the credit bureaus. You’ll need to write a letter to plead your case (i.e. inaccurate information). You can also request that the credit bureaus verify the bankruptcy. They have 30 days to respond or the credit bureaus must delete the entry from your credit report.

But what if they do respond without providing proof that they actually verified the debt? Retrieve a written statement from the court to prove the credit bureaus failed to verify the bankruptcy. You would then send this information on to the credit bureaus to have the bankruptcy removed from your credit report.

When working to get the bankruptcy removed from your credit report, you should also address the associated collection and charge off accounts that were apart of the bankruptcy proceedings. The fewer negative entries on your credit report, the better..

Hire a reputable credit repair company

Are you uncomfortable with the dispute process or strapped for time? It may be worthwhile to hire an experienced, reputable credit repair company to do the legwork for you. They possess the knowledge to work towards having the bankruptcy removed in the shortest amount of time possible. Reputable credit repair companies will also address other negative items on your credit report to give your score the best possible chance of recovering from the damages sooner than later.

Tips to help rebuild your credit after bankruptcy

If you’ve already felt the wrath of bankruptcy, chances are you’re not feeling too optimistic about your future credit score. However, the good news is filing for bankruptcy won’t haunt you forever, and the odds of rebuilding your credit are definitely in your favor.

Of course, having the bankruptcy removed from your credit report is the easiest way to get your credit back on track in the shortest period possible. You can also take the following actions to boost your score:

Clean up your “financial” act

There are a number of reasons why you may have been forced to file for bankruptcy. But what’s most important when rebuilding your credit is not the culprit, per se, but making sure that history doesn’t repeat itself. In other words, you want to establish a solid plan for your finances to make your money work for you. In your list of objectives should be creating a realistic budget that keeps your spending in check, safety net, and plans to eradicate debt that wasn’t included in the filing.

Confirm accounts included in the filing are updated

As mentioned earlier, debts discharged in bankruptcy should be updated to reflect a zero balance. This will automatically give your score a small boost because your credit utilization ratio will plummet.

So, you want to access a free copy of your credit report from AnnualCreditReport.com and confirm accounts that were included in the filing are being reported accurately. If not, file a formal dispute with the credit bureaus to have the accounts rectified.

Stay on top of your credit report

Is your credit score an accurate representation of your credit history or are errors dragging your score down? While the bankruptcy probably took a toll on your score, there’s a possibility that other inaccurate or untimely information is in your credit report and impacting your credit rating.

For this reason, you should review your report regularly to ensure all the information contained is accurate and untimely. And should you find issues, dispute them with the credit bureaus promptly.

As mentioned earlier, you can access free copies of your report once a year from the three credit bureaus through AnnualCreditReport.com. It’s also a good idea to stay on top of your credit report and activity through a free credit monitoring service, like Credit Karma, Credit Sesame, or WalletHub.

Apply for a credit builder loan

While working to have the bankruptcy removed, you can also apply for a credit builder loan through your financial institution or local credit union. Credit builder loans require a deposit into a savings account that is equal to the loan amount. The financial institution reports payments to the credit bureaus and the funds are accessible once you pay the loan off.

You can also use Self Lender, which only requires a small administrative fee upfront and monthly payments until the loan is paid in full. In a nutshell, they take the loan amount and deposit it into a certificate of deposit. Payments are reported to the three credit bureaus to help you establish a positive credit history. And at the conclusion of the loan term, you can withdraw the funds or choose to roll them over into another credit builder loan product.

Get a secured credit card

If you don’t mind making an initial deposit to access your credit line, a secured credit card may be right for you. They’re another great way to help rebuild your credit after bankruptcy and function just like unsecured credit cards. However, they sometimes come with hefty APRs and administrative fees. And the creditor holds your deposit until the account closes or the creditor extends an unsecured credit card offer to you.

Be sure to make timely payments on any new debt or credit products

Since late payments account for 35 percent of your credit score, you can’t afford to not make timely payments on credit products when you’re trying to rebuild your credit after bankruptcy. Why so? Well, all it takes is one late payment to plummet your score between 90 and 110 points, notes Equifax.

The good news is creditors won’t report past due accounts until they’re delinquent by over 30 days. So, besides the fee that you’ll incur, a payment that’s a few days late isn’t the end of the world.

Manage new credit responsibly

Amounts owed account for 30 percent of your credit score, and the lower your credit utilization, the better. This means you should manage new credit responsibly by using any new revolving credit sparingly. Aim for a credit utilization ratio of 30 percent or lower.

The bottom line

Filing for bankruptcy doesn’t mean your finances and credit score won’t recover. And by taking the right steps, you can have it removed from your credit report and start rebuilding your score sooner than you think.

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