Can I Remove a Bankruptcy Filing From My Credit Report?
More than 320,000 people in the U.S. filed for bankruptcy between January and May 2018, according to the American Bankruptcy Institute.
A bankruptcy filing will hit your credit report (and therefore be reflected in your credit score) almost immediately. You might be wondering if there is any way to remove it from your report. If your bankruptcy was legitimately filed, the answer is no. But if it was incorrectly or fraudulently filed, then you can have it fixed or removed.
Even though a legitimate bankruptcy filing cannot be removed from a credit report, there are steps you can take to keep your credit in tip-top shape so that once the filing eventually falls off of your report, you’ll be primed to receive better credit.
How long does a bankruptcy stay on my credit report?
A bankruptcy filing hits your credit report almost immediately. It has immediate, negative implications for your credit score and indeed for your credit report. And unfortunately, the bankruptcy filing stays on your credit report for quite a while.
If you filed for Chapter 7 bankruptcy — the form in which most of your debts are forgiven — the bankruptcy will stay on your credit report for 10 years. If you filed for Chapter 13 bankruptcy — the form in which your finances are restructured — the bankruptcy will stay on your credit report for seven years.
The reason Chapter 13 files fall off sooner is because you are paying back some portion of your debt. Because you’re repaying your debt, you get punished a little less.
After those seven or 10 years are up, the bankruptcy filing should automatically fall off of your credit report. If somebody checks your credit report or you check your own credit report after that either seven or 10 years, [the bankruptcy] should not be evident.
Although the filing should be removed after seven or 10 years, that’s not always the case. Oftentimes, the credit reporting bureaus make mistakes, and you might have to notify them in writing to remove the filing.
How does bankruptcy affect your credit score?
Bankruptcy hits one’s credit report almost immediately because the three credit-reporting agencies proactively go out and pick up bankruptcy filings from public court records.
You’re not going to avoid it. If you file for bankruptcy, you can count with an egg timer how quickly a record of it is going to appear on your credit reports.
The amount your credit score dips depends on how high it was before you filed for bankruptcy.
If you have a really bad credit score, it usually takes about 100 points. If you have a good credit score, it usually takes about 200 points. For example, someone with a 770 credit score would likely drop to around 570, while someone with a 500 credit score might only drop to 400.
Credit scores take the path of least resistance — they’re like water. A credit score that is respectable is going to take a larger dive because it has more to go.
People often think that bankruptcy is going to kill their credit score. But in reality, most people who file for bankruptcy don’t have stellar credit to begin with. Most of their problems began before they filed.
Usually, there’s this crescendo of accounts going into minor forms of delinquency, major forms of delinquency, default and then boom, the collections start hitting the credit report. It’s the buildup [to the filing] that really causes the scores to plummet. It’s not really the bankruptcy that causes the scores to plummet, because they’re already bad.
Can bankruptcy be removed from your credit report?
If the bankruptcy filing is legitimate, it cannot be removed from a credit report.
I’ve never talked to anyone who has had a bankruptcy prematurely removed from a credit report.
Because bankruptcy is part of public record — it’s done in court and is a public action — it cannot be removed the way you might get a late payment from Macy’s removed from your credit report.
If the bankruptcy is correct, meaning that it actually belongs to you, and it’s verifiable — meaning that the bureaus can verify its accuracy if you challenge it — then seven to 10 years is how long you’re going to have to live with it.
If the bankruptcy was fraudulent, inaccurately filed or didn’t drop off of your credit report after seven or 10 years, then there are steps you can take to have it removed from your credit report.
First, you should check your credit reports through the three major credit-reporting bureaus. The bankruptcy filing will be located with other public record information, such as civil judgments and tax liens.
If a fraudulent bankruptcy appears on your credit report, or you notice inaccuracies regarding the bankruptcy you did file, you need to file a dispute with the credit-reporting agency in question by sending a procedural request letter.
Credit reporting agencies will typically investigate the error in question within 30 days, according to the Federal Trade Commission (FTC). If an error is found, all three credit-reporting agencies will be notified. In addition, you can request the credit-reporting agency send the corrected report to anyone who received your credit report in the past six months.
Don’t get suckered into speeding up the process
You may be tempted to reach out to a credit repair agency to try to get bankruptcy records scrubbed from your account. Any company that promises to do so is not a company you want to work with. As we’ve pointed out, it’s not possible to remove a legitimate bankruptcy filing from your credit report early.
Credit repair agencies can be rife with scams and inaccurate claims for how they can help people. Services provided by credit repair agencies can also be expensive. Therefore, you should attempt to remove the fraudulent activity or inaccurate information on your own before consulting a credit repair agency.
Rebuilding your credit
Although a bankruptcy filing eventually falls off of your credit report, by no means will your credit suddenly skyrocket.
Even though it disappears from your credit report, that doesn’t mean it really disappears. There are a lot of times when you apply for certain kinds of credit where you’ll still have to state if you’ve ever filed for bankruptcy. So it can haunt you for a really long time.
Because it’s difficult to secure credit after filing for bankruptcy, it can be difficult to increase your credit score. But there are steps you can take to incrementally improve your credit score so that it will be in better shape once the seven or 10 years has elapsed.
Get a secured card
A secured card requires an upfront deposit which becomes your credit limit. Payments are reported to credit bureaus.
Open a regular credit card
If you trust yourself to use credit responsibly, getting a new card can help rebuild your credit. People who have filed bankruptcy actually have an easier time getting approved for new credit than you might think. But because your credit is likely poor, you’ll have to contend with fewer good options. The credit card you get might be 25 percent APR and have an annual fee of $150 just to get it, and the terms will probably be onerous, but you’ll probably be able to get the credit.
Store credit cards are typically easier to secure because they have more punitive terms associated with them. That’s a great way to get some new, good stuff on your credit report.
Pay cards off in full each month
Charge just one monthly recurring bill to the account and pay it in full each month. Don’t use it for expenses you wouldn’t otherwise afford, or you’ll quickly dig yourself back into debt.
Sullivan said it’s wise to have a few very small lines of credit like this. Have those lines and be very careful to pay them off so that you build something for when [the bankruptcy] does fall off in 7 or 10 years.
Apply for a credit builder loan
These are loans that are very low and typically issued by a credit union. The borrower usually pays the loan back between six and 12 months. It’s almost like Loan 101. Really, the entire purpose of it is to help you build or rebuild your credit report.
Your scores will slightly improve by just letting time pass. If you want to avoid credit for a while because you are a little shell-shocked from your failure and had to file bankruptcy, then you can just sit on the sidelines.