The Impact of Bankruptcy on Your Credit Score

The payment history that you have made on time will account for about 35% of your total credit score. However, this is only one factor. Learn more about the impact of bankruptcy on your credit score.



Impact of bankruptcy on credit score

The impact of bankruptcy on credit score is quite variable, depending on the number of accounts that have been discharged and the ratio of positive to negative accounts on the report. While credit scoring companies do not consider bankruptcy a permanent mark against your credit history, bankruptcy will remain on your credit report for seven years. The longer your bankruptcy stays on your report, the worse the impact will be on your credit score. Fortunately, bankruptcy can be overcome with the right financial management.

If you’ve recently filed for bankruptcy, you probably already have a low credit score. Bankruptcy can impact your ability to borrow money and will take years to clear. However, it can improve your credit rating and allow you to apply for similar credit. Because the debts that you’ve paid will have been discharged, your credit score will increase and you may be able to qualify for better credit in the future.

After filing for bankruptcy, you can start rebuilding your credit score by establishing a positive payment history with new creditors and any accounts that survived the bankruptcy. By paying off debts, building an emergency fund, and making all payments on time, you can begin the process of improving your credit score. You’ll be surprised at how quickly your credit score begins to recover. If you’re proactive, you can even get a job as soon as six months after filing.

Even if the impact of bankruptcy is severe, it doesn’t mean your credit score is destroyed. The filing will stay on your credit report for up to ten years. As long as you follow the steps to rebuild your credit and stay on a clean financial track, your credit score should remain strong. If you’re struggling with debt, you may temporarily sacrifice your credit score for the sake of your financial future. The impact of bankruptcy will be minimized once the ten-year mark has passed.

The good news is that your credit score can improve significantly after bankruptcy. Although there is no way to remove the bankruptcy from your credit report, it can be cleared up with some time. A bankruptcy is not removed from your credit report unless it was reported in error. However, bankruptcy will affect your credit report, making it harder to obtain credit in the future. A bankruptcy will remain on your credit report for years after your filing, advising potential lenders of your past payment problems. Some creditors will refuse to grant your application if you have a bankruptcy on your report.

Most bankruptcies are due to medical bills.

Equifax reported an average score of 538 pre bankruptcy and 620 six months later.

In 2022, there were 2 million consumer bankruptcies.


Payment history counts for 35% of a credit score

Your payment history accounts for 35% of your credit score. It shows how well you pay your bills, as well as how often you’re late. The more recent and large your late payments are, the worse they are for your score. If you consistently pay your bills on time, your score will be higher than someone whose payments are consistently late or past due. However, there are many things you can do to improve your payment history, including paying off high-interest accounts on time.

Lenders consider your credit worthiness, and late payments have a negative effect on your score. Moreover, your credit utilization is another big factor. Using up credit cards is a bad idea, since late payments can remain on your credit report for seven years.

Your payment history is the most important part of your credit report. It reflects your ability to pay your debts. In addition to being the most important factor, payment history counts for 35% of your total score. If you’ve consistently paid your bills on time, you’ll be considered a lower-risk borrower. You should keep this in mind when applying for credit. Also, remember that your credit score can change over time, so it’s important to review it regularly.

Your payment history accounts for the most part of your FICO Score. Although paying your debts on time boosts your credit score, paying late and making missed payments hurts your score. A negative payment history tells lenders that you’re having difficulty meeting your obligations, and this signals a bad attitude towards credit. Keeping your credit history current is one of the best ways to increase your score. You can do this by focusing on paying your bills on time and minimizing your debt utilization ratio.


Late payments are only one factor

Your credit score is based on many factors, but the single biggest is your payment history. Your payment history is over one-third of your credit score. Lenders use your payment history to determine your ability to repay debt. Missed or late payments can significantly damage your credit. While late payments can be damaging to your credit score, it is not the only factor. There are ways to repair your payment history to boost your score.

A late payment can drop your credit score by as much as 180 points. This is because a late payment signals to creditors that you will have trouble repaying your debts. Lenders view this as a riskier borrower. Therefore, late payments affect your credit score more than other factors. If you have a long history of on-time payments, you might even see a significant increase in your score.

A 30-day delay in a payment can quickly drop your score. Payment history makes up 35% of your credit score. Missing just one payment will not have a big impact on your score, but a pattern of late payments over time will lower your score. A missed payment can stay on your report for up to seven years. As time passes, its impact will be lessened, eventually disappearing. However, it is still important to pay your bills on time to avoid a big dip in your credit score.

If you have missed a few payments, make sure to catch up as soon as possible. Missing payments over 30 days can knock up to 100 points off your score. If your score is already low, it won’t hurt nearly as much. Sadly, the coronavirus pandemic has left many people in a financial crisis. If this happens to you, it is essential to contact your creditors right away to find a solution.

Remember that late payments are only one factor in your score. After a year, their impact on your score will lessen. Nonetheless, it is a good idea to get help for your finances as soon as possible to improve your score. It can be hard to get back to where you were before, but you can make it easier with time. Make your minimum payments and call your creditors before the due date to see if you can extend the payment deadline.


Other factors don’t affect a credit score

While you may have heard that certain factors affect your credit score, that isn’t necessarily the case. While certain factors are considered to affect your credit score, such as your income, bank balance, and employment status, they do not. Other factors, such as your age, marital status, and use of credit cards, also don’t have an impact on your overall score. Using credit cards responsibly is one way to boost your score.

Your income doesn’t affect your credit score, but it can affect other aspects of your life. If you earn less than your spouse does, you can still build a good credit score. But if you lose your job and can’t afford to pay your bills on time, this could be a problem. Even though income doesn’t affect your credit score, it can still affect your ability to pay your bills.


Number of filings per year:

  • 2021 399k
  • 2020 523k
  • 2019 752k
  • 2018 751k
  • 2017 766k


  • 52% are male.
  • 8% have filled in the past.
  • 60% earn less than $30k/yr.
  • 64% are married.
  • Chapter 7 bankruptcy is the most common form of bankruptcy in the U.S., accounting for around 62% of all filings in 2020.
  • The state with the highest number of bankruptcy filings in 2020 was California, with 60,078 filings.
  • According to a study by the American Bankruptcy Institute, medical debt was the leading cause of bankruptcy filings in the U.S. in 2019, with 62% of all bankruptcy filings attributed to medical expenses.
  • The average debt per capita for those who filed for bankruptcy in 2020 was $75,508.
  • The percentage of bankruptcy filings due to business-related debt has been declining over the years, with only around 2% of all filings in 2020 attributed to businesses.



2. How does bankruptcy affect my credit score?

Bankruptcy can have a significant negative impact on your credit score. It’s like a storm cloud that hovers over your credit history, causing your score to take a hit. A bankruptcy filing will remain on your credit report for several years, making it challenging to obtain credit or loans in the future.

3. How long does bankruptcy stay on my credit report?

The length of time bankruptcy stays on your credit report depends on the type of bankruptcy you file. A Chapter 7 bankruptcy, which involves the liquidation of assets, can stay on your credit report for up to 10 years from the filing date. A Chapter 13 bankruptcy, which involves a repayment plan, typically remains on your credit report for 7 years from the filing date.

4. Can I rebuild my credit after bankruptcy?

Absolutely! While bankruptcy leaves a mark on your credit report, it’s not the end of the road. You can rebuild your credit over time by adopting responsible financial habits. It’s like a phoenix rising from the ashes, showing lenders that you’ve learned from past mistakes and are committed to better financial management.

5. How can I start rebuilding my credit after bankruptcy?

Rebuilding your credit after bankruptcy requires patience and perseverance. Here are some steps you can take:

  • Pay your bills on time: Consistently making on-time payments for your remaining debts is crucial. It’s like building a solid foundation for your credit recovery.
  • Establish a positive credit history: Consider opening a secured credit card or becoming an authorized user on someone else’s credit card to start rebuilding your credit. Use these accounts responsibly and make timely payments.
  • Monitor your credit report: Regularly check your credit report for errors or inaccuracies. Dispute any incorrect information and ensure that your post-bankruptcy accounts are being reported accurately.

6. Can I get a loan or credit card after bankruptcy?

Getting a loan or credit card immediately after bankruptcy can be challenging. However, as time passes and you demonstrate responsible financial behavior, lenders may become more willing to extend credit to you. Start with secured credit cards or small loans and gradually work your way up to more traditional credit options.

7. Will bankruptcy impact my ability to rent an apartment or get a job?

Bankruptcy may impact your ability to rent an apartment or find certain employment opportunities. Landlords and employers often check credit history as part of their evaluation process. While bankruptcy doesn’t guarantee rejection, it’s important to be prepared for potential obstacles and be upfront about your financial history.

8. Should I consider bankruptcy as a solution to my financial troubles?

Bankruptcy should be considered as a last resort when all other options have been exhausted. It has serious long-term consequences and should not be taken lightly. Consult with a qualified bankruptcy attorney to fully understand your options and make an informed decision.

9. Can bankruptcy impact my ability to get a mortgage or car loan?

Yes, bankruptcy can have a significant impact on your ability to secure a mortgage or car loan. Lenders view bankruptcy as a risk factor, as it indicates a past inability to manage debts. While it may be more challenging to obtain these types of loans after bankruptcy, it’s not impossible. You may need to wait until your credit has sufficiently recovered, and you may also need to work with specialized lenders who offer post-bankruptcy financing options.

10. Will my credit score start improving immediately after bankruptcy is discharged?

While the discharge of your bankruptcy marks the end of the legal process, it doesn’t automatically guarantee an immediate improvement in your credit score. Rebuilding your credit takes time and consistent responsible financial behavior. It’s like planting a seed and nurturing it to grow over time. As you demonstrate good credit habits and your bankruptcy recedes into the past, your credit score will gradually improve.

11. Can I remove bankruptcy from my credit report before the specified time period?

Bankruptcy cannot be removed from your credit report before the specified time period mandated by credit reporting agencies. It’s like trying to erase a permanent tattoo—it’s there for a set duration. However, you can take steps to rebuild your credit and improve your overall creditworthiness, even with bankruptcy on your report.

12. Should I avoid credit altogether after bankruptcy?

No, avoiding credit altogether after bankruptcy won’t help you rebuild your credit. It’s important to use credit responsibly and show lenders that you can manage it effectively. Start with small credit-building strategies, such as secured credit cards or credit-builder loans, to demonstrate responsible borrowing and repayment behavior.

13. Can I qualify for credit cards with rewards after bankruptcy?

Qualifying for credit cards with rewards immediately after bankruptcy may be challenging. However, as you rebuild your credit over time, you can work towards obtaining credit cards with rewards. Start with secured credit cards or cards specifically designed for individuals with limited or damaged credit. As your credit improves, you’ll have access to a wider range of credit card options.

14. Can I file for bankruptcy multiple times?

While it’s possible to file for bankruptcy multiple times, it’s not a decision to be taken lightly. Each type of bankruptcy has specific waiting periods before you can file again. It’s important to seek professional advice and explore alternative solutions before considering a subsequent bankruptcy filing.




In the realm of finance, a topic so vast, Where numbers and debts seem to forever last, Amidst the complexities that money brings, Let’s weave a poetic tale about such things.

Bankruptcy, a word that holds weight, A path that many find hard to navigate, A tale of financial struggle and woe, But fear not, for there’s still room to grow.

When bankruptcy looms, credit scores may sway, Like a stormy sky on a gloomy day, But remember, it’s not the end, my friend, It’s a chance for a fresh start to mend.

Through the haze of debts, a new path appears, Rebuilding credit, banishing your fears, Pay bills on time, a responsible act, Like a sunbeam breaking through the darkest of cracks.

Credit utilization, a factor profound, Keep it low, let your financial prowess astound, Like a tightrope walker, balanced and steady, Navigate your credit wisely, you’re more than ready.

Bankruptcy’s mark may linger on your report, A reminder of the past, a shadow of sorts, But as time passes and wounds start to heal, Your credit’s rebirth will be surreal.

Seek opportunities, credit in disguise, Secured cards, loans, with a hint of surprise, Rebuild slowly, step by step, with grace, A new credit journey, a fresh embrace.

So, fear not the impact of bankruptcy’s hold, For within lies a story yet to unfold, With resilience and patience as your guiding light, You’ll rise above, shining ever so bright.

In the realm of credit, a tale of rebirth, Where setbacks become lessons of worth, Remember, my friend, with each step you take, You’re shaping a credit future, like poetry’s wake.