Does a Bankruptcy Ever Go Off of Your Credit Record?

Bankruptcy is an option for consumers who find themselves struggling under severe financial strain. Unfortunately, while bankruptcy helps you manage your debt – sometimes even discharging it in its entirety – it shows up on your credit report during future credit checks and causes considerable damage to your score. Bankruptcy, however, does not appear on your credit record indefinitely.

Bankruptcy Reporting Period

According to the Fair Credit Reporting Act, each credit bureau has the right to maintain records of your bankruptcy for up to 10 years. If you filed Chapter 7 bankruptcy, which allows you to discharge your debts, the bankruptcy notation typically remains for the full 10-year reporting period. If you filed Chapter 13 bankruptcy, which lets you repay your creditors as much as you can over time, the credit bureaus usually remove the bankruptcy notation after seven years.

Removal Misconceptions

Even if you practiced excellent debt management skills in the years since you filed for bankruptcy, your credit score may drop when the bankruptcy disappears from your record. This is because the credit bureaus score individuals within brackets. If you have a bankruptcy on your credit history, your score is calculated with your past bankruptcy in mind. Once the bankruptcy disappears, you move into a scoring bracket populated with consumers who do not have past bankruptcies – resulting in the credit bureaus calculating your credit score differently.

Improving Your Score

You can improve your creditworthiness long before the credit bureaus remove your bankruptcy from your credit report. Paying your creditors on time, keeping low balances on your credit cards and disputing and correcting errors within your credit history results in your score gradually improving. Because negative entries influence your credit rating less as they age, your positive debt management practices will result in your credit score slowly increasing over time.

Even if your credit score drops after the credit bureaus remove the bankruptcy, this drop is only temporary and, provided you demonstrate responsible behavior with your debts, your credit score will gradually recover.

Early Removal

Occasionally the credit bureaus and the court systems make mistakes. If a bankruptcy appears on your credit report, yet you never filed for bankruptcy, you can dispute the entry with both the credit bureaus and the courts. The FCRA requires that the credit bureaus investigate your dispute. If the credit bureaus cannot validate that the supposed bankruptcy did, in fact, take place, they must remove it from your credit record before the federal reporting period expires.