Credit After Bankruptcy Study

Study: It’s possible that bankruptcy can actually help your credit score

LendingTree says with a credit after bankruptcy study that people can have higher credit scores after bankruptcy than they did prior. It says that almost half can qualify to buy a house just one year later. Further, it said almost two-thirds would have decent credit to finance a home or car two years after discharge.

Key findings:

• Forty-three percent of people with a bankruptcy on their credit file have a credit score of 640 or higher within a year of the bankruptcy. Within two years of bankruptcy, 65 percent have a credit score above 640.
• A typical $15,000 auto loan incurs an extra $2,171 in borrowing costs for those seeking offers less than a year after bankruptcy, but just $799 for those who wait at least two years after bankruptcy.
• Borrowers who have a 3-year-old bankruptcy and apply for a mortgage see an offered APR that is 19 basis points higher than those without a bankruptcy. The higher the APR, the higher borrowing costs will be.
• Mortgage borrowers with scores between 720 and 739 three years after bankruptcy were offered similar APRs to those without bankruptcy, indicating a strong credit score can counteract the effects of a prior bankruptcy.

Credit after Bankruptcy

All this goes to show that there is credit after bankruptcy discharge. People shouldn’t feel that their bad credit and high debt ratio is the end. We generally know that bankruptcy is bad on your credit. But, handled properly, a Chapter 7 or Chapter 13 bankruptcy can be the start of the road to recovery to rebuilt credit after bankruptcy discharge.