A person's credit score may be significantly and permanently impacted by bankruptcy. The type of bankruptcy that was filed and the rules of the credit reporting bureau determine the precise time frame. Here is a general summary:
Chapter 7 bankruptcy: For people, this is the most typical kind of bankruptcy. In order to pay creditors, assets must be liquidated. Your credit report will reflect a Chapter 7 bankruptcy up to ten years after the filing date.
Chapter 13 Bankruptcy: In this sort of bankruptcy, a repayment plan is made to pay off debts over a three- to five-year period. Your credit report will reflect a Chapter 13 bankruptcy up to seven years after the filing date.
Bankruptcy will significantly lower your credit score while it is still included on your credit record. It can make it difficult to get new credit, and if you do, you might have to deal with tougher requirements or higher interest rates.
It's important to keep in mind, though, that as you go on to manage your finances responsibly, the negative effects of bankruptcy on your credit score gradually fade. Your credit score can gradually rise as you rebuild your credit history by paying bills on time, keeping your credit utilization ratio low, and handling your money properly.
To fully grasp the exact effects of bankruptcy on your credit score and create a strategy for gradually rebuilding it.