Education Center

How to remove bankruptcy from credit report?

Bankruptcies are one of the most damaging items that can show up on your credit report. Like lawsuits and tax liens, they are reported as a public record and accumulate your credit score.

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

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

(Quick note: Have you recently filed for bankruptcy? Were the accounts included in the filing reported correctly? 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 for the debt covered by the filing and, if applicable, attach any supporting documentation to support your claim.)

Your credit score will start to recover 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 that your credit utilization ratio will now be much lower. And since amounts owed make up 30 percent of your credit score, you’ll start to see small increases as creditors update balances.

But if you can remove bankruptcy from your credit report, that means good news for your credit score sooner rather than later. More on that shortly.

How does bankruptcy affect my credit score?

The impact of bankruptcy on a credit report can be devastating and depends entirely on your credit score before applying.

According to the Damage Points guidelines published by FICO, the effects vary between 130 and 250 drop points. For instance:

A person with a credit score of 680 would drop between 130 and 150 points.
A person with a credit score of 780 would drop between 220 and 240 points.
So if your credit score were high, a bankruptcy would instantly put you in the poor category. Starting with a good score, you also end up with a bad score, but your score doesn’t drop that far.

The bottom line is still negative – your credit score is bad and will prevent you from being approved for new credit. The lower your initial score, the less drastic the impact will be.

Discharge date versus reporting schedule

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

Total discharge or Chapter 7- up to 10 years from the filing date
Reorganization or Chapter 11- up to 10 years from the filing date
Payment plan or bankruptcies completed under Chapter 13; usually takes 3-5 years) – up to 7 years from the filing date
But individual accounts included in the presentation 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 a lot of persistence. But it’s not impossible. You have two options to move on:

Can I rebuild my credit after bankruptcy?

You can rebuild your credit after bankruptcy, but it is a long process. Your options will be limited at first, but it is key not to get discouraged. As time goes on, if you constantly pursue a credit rebuilding strategy, your reports and scores may improve.

Here are some recommendations to get you started:

Understand the Cause – Identify, accept, and learn from the root causes of your bankruptcy so you won’t find yourself in the same position in the future.
Stick to a budget – Reassess your finances and see where you can cut expenses and save more money if you can.
Start building a new credit history: No, this does not mean using an alias (which is something unethical credit repair companies may recommend). It means starting from scratch with whatever credit you can get.
This may mean settling for an extremely high interest rate, hiring a co-signer, depositing cash on a secured credit card, or other options that have been specifically designed to help you reestablish a positive credit history.

Use these credit options sparingly and never put more on a card than you can afford at the end of the month so your credit improves over time.

DIY vs professional credit repair

Credit repair can often seem like a problem. You may not have a lot of expendable income to hire a professional credit repair company, but you probably don’t have the technical know-how or emotional bandwidth to tackle it yourself. We understand.

However, bankruptcy is the negative element with which we most encourage our readers to obtain professional help. The steps we outline are advanced tactics that, in most cases, are best left to credit repair specialists. They are more familiar with the ins and outs of credit bureaus and court systems, as well as the steps we will describe.

You don’t have to do it alone. Hire the services of Chire Credit Restoration and start seeing results.

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

Of course, removing bankruptcy from your credit report is the easiest way to get your credit back in the shortest time possible. You can also take the following actions to improve your score:

Clean up your “financial” act

There are several reasons why you may have been forced to file for bankruptcy. But the most important thing when rebuilding your credit is not the culprit, per se, but making sure that history does not repeat itself. In other words, you want to establish a solid plan for your finances so that your money works for you. Creating a realistic budget that keeps your spending in check, safety net, and plans to eradicate debt that was not included in the presentation should be on your list of goals.

Confirm that the accounts included in the presentation are up to date
As mentioned above, debts canceled in bankruptcy should be updated to reflect a zero balance. This will automatically give your score a little boost because your credit utilization ratio will plummet.

Therefore, you want to access a free copy of your credit report from AnnualCreditReport.com and confirm that the accounts that were included in the submission are accurately reported. If not, file a formal dispute with the credit reporting agencies 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 mistakes dragging your score down? While bankruptcy likely affected your score, there is the possibility that other inaccurate or untimely information on your credit report affects your credit score.

For this reason, you should review your report regularly to ensure that all the information it contains is accurate and timely. And if you find problems, discuss them with the credit reporting agencies right away.

As mentioned above, you can access free copies of your report once a year from all three credit bureaus through AnnualCreditReport.com. It’s also a good idea to keep track of your credit report and activity through a free credit monitoring service, such as Credit Karma, Credit Sesame, or WalletHub.

Apply for a credit building loan

As you work to clear bankruptcy, you can also apply for a credit building loan through your local financial institution or credit union. Credit building loans require a deposit in a savings account that is equal to the amount of the loan. The financial institution reports the payments to the credit bureaus and the funds are accessible once the loan is paid off.

You can also use Self Lender, which only requires a small upfront administrative fee and monthly payments until the loan is paid in full. Simply put, they take the loan amount and deposit it in a certificate of deposit. Payments are reported to all three credit bureaus to help you establish a positive credit history. And at the end of the loan term, you can withdraw the funds or choose to transfer them to another credit-building loan product.

Get a secured credit card

If you don’t mind making an initial deposit to access your line of credit, a secured credit card may be right for you. They’re another great way to help rebuild your credit after bankruptcy, and they work like unsecured credit cards. However, they sometimes come with high annual percentage rates and administrative fees. And the creditor holds your deposit until the account is closed or the creditor makes you an unsecured credit card offer.

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

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

The good news is that creditors will not report past due accounts until they are more than 30 days past due. So in addition to the fee you will incur, a payment that is delayed a few days is not the end of the world.

Manage New Credit Responsibly

Amounts owed represent 30 percent of your credit score, and the lower your credit utilization, the better. This means you need to manage new credit responsibly by using any new revolving credit sparingly. Aim for a credit utilization rate of 30 percent or less.

The bottom line

Filing for bankruptcy does not mean that your finances and credit score will not recover. And if you follow the right steps, you can remove it from your credit report and start rebuilding your score sooner than you think.