Bankruptcy will cause a significant decrease in your credit score. It can be a scary time for anyone. The good news is bankruptcy will automatically be removed from your credit report after seven to 10 years. You don’t have to do anything about removing dismissed bankruptcies on a credit report.
But what if you didn’t have a bankruptcy and you still see one on your credit report? You can get it off your credit report sooner than the normal seven to 10 years if it was a mistake. In that case, you’ll need to take steps to remove bankruptcies from a credit report, including contacting all three credit bureaus.
How long does bankruptcy stay on your credit report?
Bankruptcy stays on your credit report for seven to 10 years. Whether it stays for seven or 10 years depends on the chapter you file. Chapter 13 bankruptcy will be deleted seven years after the filing date and requires at least partial repayment of the debts owed. Chapter 7 bankruptcy is deleted 10 years after the filing date partly because none of the debt is repaid.
Early removal of bankruptcy from your credit report
You can only remove bankruptcy from your credit report if it’s inaccurate. This can be if you never filed for bankruptcy but it’s showing on your credit report. It can also be if the credit report is showing Chapter 7 bankruptcy when you filed for Chapter 13 bankruptcy.
How to dispute bankruptcy errors on your credit report
How do you get bankruptcy off a credit report early? That’s only possible if it’s there in error. If the bankruptcy is an error on your credit report, you have the right to dispute it as you would with all other incorrect information on your credit report. Here are the steps to take to remove bankruptcies from your credit report.
Review your credit report
Obtain your credit report and review the debt to ensure it’s a mistake. You can obtain a copy of all three credit reports from Experian, Equifax, and TransUnion at Annual Credit Reports. You can also request your credit reports by phone at 877-322-8228 or by mail. You can download the form and mail in your request.
Be sure to check your credit report for other inaccuracies in addition to the bankruptcy and dispute all issues at once.
Gather relevant information
You’ll need to prove your case. For that, one recommendation is to gather pay stubs, information on credit card payment history, mortgages, auto loans, student loans, and any other debt you may have. You’ll need to demonstrate that you never filed for bankruptcy. For the initial dispute, you’ll only need basic information like your name and Social Security number as well as information about the disputed entry as it’s stated on the credit report.
Contact a credit reporting agency
You can then call each of the three main credit bureaus and explain why the information is incorrect. Sometimes, that is enough to remove inaccurate information and get bankruptcy off your credit report early.
Here are the phone numbers:
- Experian: 888-397-3742
- Equifax: 888-378-4329
- TransUnion: 888-909-8872
At a minimum, they will put a note in your file that you will be disputing incorrect information.
File a dispute
To file a dispute to remove bankruptcies from your credit report if they are there in error, you can start by filling out a simple form provided by each of the credit bureaus. The Consumer Financial Protection Bureau provides detailed guidance on how to dispute incorrect information to each of the three credit bureaus, including online forms, mail-in addresses, and phone numbers.
Wait until the information falls off your credit report
You could wait until the information falls off your credit report. Credit bureaus will automatically remove bankruptcies from a credit report after seven or 10 years. For that, you don’t have to do anything. If, after the appropriate time, the bankruptcy is still on your credit report, you can call and ask when it will be removed. It may be that it is already in process. If you think the bankruptcy is incorrect, this is probably not the best solution.
How to rebuild your credit after bankruptcy
While there is only so much you can do to remove the bankruptcy from your credit report before seven or 10 years, there are several steps you can take to rebuild your credit score.
Adopt a debt repayment strategy
If you have additional debt, now is the time to focus on clearing it. You can use whichever debt repayment strategy makes the most sense for you. The two most common are the snowball or avalanche methods.
In the snowball method, you focus on clearing the smallest debts first, working toward large debt. That means that if you have debt on three credit cards in the amounts of $500, $5,000, and $9,000, you’ll pay off the credit card with $500 in debt before moving on to the $5,000 debt and finally tackling the $9,000.
In the avalanche method, you focus on paying off the loans with the highest interest rates first. In the example above, if the same three cards had interest rates of 18%, 22%, and 27% respectively, you’d focus on the one with the 27% interest rate first. Even if that card has $9,000 in debt, in the long run, all other things held constant, you’ll save more on interest by paying off that card first.
You can choose either method or another strategy. It’s generally a good idea to pick the strategy you think is best for you and stick with it.
Make timely payments
On-time payments will help build your credit score even after bankruptcy. On-time payments still make up 35% of your total credit score. Start building your credit score from Day 1 after bankruptcy with on-time payments.
Apply for a secured credit card
With a secured credit card, you pay a cash deposit upfront, which is used to guarantee your credit line. Secured credit cards can be an important first step to rebuilding credit after bankruptcy.
Consider a credit-builder loan
A credit-builder loan is a way to build your credit score. With a credit-building loan, you make fixed payments to the lender and get access to the funds at the end of the loan’s term. This type of loan is specifically designed to help people with low credit scores to build creditworthiness. Even if you don’t think you’ll need a loan in the near future, it’s worth taking a credit-builder loan specifically to start building your credit score.
If you are working on building up your credit or improving your credit score, MoneyLion is here to help! MoneyLion offers a free and convenient way to find offers from our trusted partners to help you improve your credit — such as credit monitoring, credit report disputes, and getting credit by paying bills. A good credit score can lead to lower interest rates and increased borrowing power on loans and credit cards.
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Become an authorized user
Becoming an authorized user is one of the fastest ways to build your credit score. If you have a friend or family member with a high credit score or good credit history, you can ask them whether they are willing to add you as an authorized user. When they do this, they can choose whether they even give you access to the credit card in your name. They may choose to hold onto it, so you can’t make charges.
As long as they have added you as an authorized user, the credit-boosting effect is the same. You’ll benefit from their years of credit history, on-time payments, and good credit scores.
Keep credit utilization low
This step involves using a small portion of your available credit. Credit utilization might sound like a mouthful, but it’s a simple concept with a big impact on your financial health. Basically, your credit utilization is the percentage of your available credit you’re using at any given time. This number gives lenders and credit bureaus an idea of how responsible you are with your credit.
An ideal credit utilization ratio is generally considered to be below 30%. Aim to use no more than 30% of your available credit at any given time. For instance, if you have a credit card with a limit of $1,000, your outstanding balance should ideally not exceed $300.
Calculating your credit utilization ratio is straightforward. Divide your total credit card balances by your total credit limits, then multiply by 100 to get the percentage.
Credit Utilization Ratio = (Total Credit Card Balances / Total Credit Limits) x 100
Create a budget and stick to it
Budgeting isn’t just about crunching numbers. It’s about taking control of your finances and making informed decisions. After bankruptcy, having a budget helps you prioritize your spending, avoid overspending, and ensure you’re meeting your financial commitments.
By sticking to a budget, you’re showing lenders and creditors that you’re managing your finances responsibly. This can help rebuild your creditworthiness over time. Plus, as you continue to follow your budget, you’ll likely have more funds to put toward savings or paying off any remaining debts, which is a positive step toward financial recovery.
Monitor your credit regularly
After bankruptcy, keeping a watchful eye on your credit is a smart move. While credit reports might not be the most thrilling read, they’re necessary for your financial recovery. They show your credit history, including any debts, payments, and other financial activities. Monitoring your credit reports helps you track your progress, spot errors, and ensure that your financial information is accurate.
How to monitor your credit
- Access your credit reports: Get your free report from each bureau and review them carefully.
- Look for accuracy: Check for any inaccuracies or unfamiliar accounts. If you spot any errors, report them to the credit bureau to get them corrected.
- Consider credit monitoring services: Various services offer ongoing credit monitoring. They can alert you to changes in your credit report to help you stay on top of your financial progress.
Create a credit comeback
Bankruptcy won’t ruin your credit score forever. Whether it appears on the report by mistake or it is a legitimate record, you can take steps to rebuild your credit starting today. With the steps above, you can be on your way to a better credit report — and less debt — this year.
FAQ
Can hiring a credit repair company help in removing a bankruptcy from my credit report earlier?
Credit repair companies may promise to erase negative information, like bankruptcy, from your credit report, but they can’t remove accurate details. Bankruptcy, if accurate, typically stays on your report for seven to 10 years. Be cautious of quick-fix claims that might not be realistic.
Will settling my debts have an impact on removing bankruptcy from my credit report early?
While settling debts is good for your financial health, it doesn’t usually speed up removing bankruptcy from your credit report. Bankruptcy’s reporting period is determined by law, and settling debts won’t alter that. But reducing debt can improve your overall financial standing.
Will removing bankruptcy from my credit report improve my credit score significantly?
Yes, removing bankruptcy can boost your credit score, but the degree of improvement varies. Bankruptcy’s presence lowers your score, and removing it helps. But other factors like payment history and credit utilization also influence your score. It’s a step toward rebuilding credit health, though an “excellent” score might not come instantly.
