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Does bankruptcy mean my credit score will go from so-so to worse?

Their credit score is one concern that stops many people in debt from filing for bankruptcy. They theorize that their already so-so credit score, which barely qualifies them for loans and the like, will nosedive. They will not be able to qualify for anything again for many years.

Fortunately, some of these assumptions are incorrect. Here is a realistic look at what can happen to your credit score.

Immediately after filing

The bad news first: Yes, you can probably expect a noticeable drop in your credit score immediately after bankruptcy. If your score is high, at least 700, it could drop by 200 points, sometimes more. If your score is more like 650, it might drop 150 points. The lower your credit score is, the less impact bankruptcy has on it.

One year after filing

Now for the good news: Your credit score may be back to where it was before your bankruptcy, or even higher, only one year after filing. For one thing, your credit report may not reflect critical debts such as credit card payments because they got discharged, and that, in turn, boosts your debt-to-credit ratio. If your credit score was good when you filed, though, it may take longer than one year for it to return to prior levels.

Five years after filing

If your credit score prior to filing was high, five years afterward is about when it might return to these high levels. On the other hand, if your score was so-so or bad, it may have reached normal levels long ago if you followed good practices such as getting a secured card and making timely payments. Five years after filing, your score could be good or close to it.

Seven to 10 years after filing

Pull your credit report to ensure that anything related to the bankruptcy is no longer on it (seven years for Chapter 13 and 10 years for Chapter 7). Your credit score may rise even more.

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