How Does Bankruptcy Affect Your Credit Score?

Bankruptcy can cause your credit score to drop significantly — often by 130 to 240 points, depending on where your score started. The filing also stays on your credit report for seven to 10 years, depending on which type you file. That's the hard part.

The encouraging part: the damage fades over time, and many people begin rebuilding credit within months of their discharge.

Key Takeaways

• Bankruptcy causes a significant score drop. Depending on your starting score, filing can reduce your FICO Score by 130 to 240 points, according to FICO.

• The type of bankruptcy matters for your report. Chapter 7 can stay on your credit report for 10 years from the filing date, while completed Chapter 13 cases are typically removed after seven years.

• The impact lessens over time. As the bankruptcy ages on your report, its negative weight on your score gradually decreases, even before it falls off entirely.

• You can start rebuilding right away. Secured credit cards and credit-builder loans can help you add positive payment history even while the bankruptcy is still on your report.

• Free credit reports are available. You can check your reports from all three bureaus at AnnualCreditReport.com to monitor your progress and catch any reporting errors.

Summary generated by AI, verified by MoneyLion editors

How Bankruptcy Affects Your Credit Score

Bankruptcy is treated as a serious negative event by credit scoring models. According to FICO, a bankruptcy will always be considered a very negative event by your FICO Score, and the impact depends largely on your credit profile before you file.

The higher your score going in, the more points you stand to lose. Someone with a score around 680 could see a drop of roughly 130 to 150 points, while someone starting around 780 could lose 200 to 240 points. Either way, the filing signals to lenders that you were unable to repay debts as agreed — one of the most heavily weighted factors in credit scoring.

Every account included in the bankruptcy will also be marked on your credit report, so future lenders can see which accounts were discharged and under what terms.

How Bankruptcy Works

Bankruptcy is a federal legal process that lets people with unmanageable debt get relief, either by discharging eligible debts entirely or restructuring them into a repayment plan. For individuals, the two most common types are Chapter 7 and Chapter 13.

Chapter 7 moves quickly — typically three to six months. Most unsecured debts like credit card balances and medical bills are discharged, and you may have to give up certain non-exempt assets depending on your state's laws.

Chapter 13 takes longer — three to five years — because it involves a structured repayment plan. You keep your assets but repay some or all of your debts through court-supervised payments. Once completed, remaining eligible debts are discharged.

Both types result in a bankruptcy notation on your credit report and an immediate score drop. The key differences show up in how long the bankruptcy stays on your report and how lenders may view your file going forward.

Chapter 7 vs. Chapter 13: Credit Impact Compared

The initial score impact is generally the same regardless of chapter — credit bureaus don't differentiate by type at the moment of filing. The difference in recovery comes down to how much sooner a completed Chapter 13 typically drops off your report.

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Why Bankruptcy Affects Your Credit the Way It Does

Your FICO Score is built on five factors, and bankruptcy touches several of them at once.

• Payment history accounts for 35% of your score and is the largest single factor. A bankruptcy signals a pattern of missed or unpaid obligations, which directly damages this category.

• Amounts owed makes up 30%. While bankruptcy may eliminate certain balances, the act of filing — and the discharged accounts that follow — affects how lenders read your debt picture.

• Credit mix and length of credit history together account for 25%. When accounts are discharged and closed, you may lose credit history and reduce the variety of account types on your report.

The more accounts included in the filing, the more of an impact it can have, according to FICO. That's worth keeping in mind before you file.

How Long Bankruptcy Stays on Your Credit Report

Under the Fair Credit Reporting Act (FCRA), a bankruptcy can be reported for up to 10 years from the filing date — and that limit applies to all bankruptcy types, including Chapter 7 and Chapter 13.

In practice, though, the three major credit bureaus — Equifax, Experian and TransUnion — voluntarily remove completed Chapter 13 cases after seven years, since Chapter 13 involves repaying part of your debt. Chapter 7 filings generally stay for the full 10 years. So the working timelines most people see are:

• Chapter 7: Up to 10 years from the filing date.

• Chapter 13: Typically seven years from the filing date.

One important detail: the clock starts from the date you file — not the date your case is discharged or completed. So even if your Chapter 13 repayment plan takes five years to finish, the reporting window started when you first filed.

Individual accounts included in the bankruptcy may fall off your report earlier — typically seven years from the date of the original delinquency — but the bankruptcy public record itself follows the timelines above.

Accurate bankruptcies can't be removed early. If the record contains errors, however, you have the right to dispute them with each bureau. The CFPB provides free guidance and sample dispute letters at consumerfinance.gov.

Does Bankruptcy Always Hurt Your Score?

In most cases, yes — but the degree varies.

If your credit score was already low before filing because of missed payments, high balances and charged-off accounts, the additional drop from bankruptcy may be smaller than you'd expect. Some of those damaging items get discharged or resolved, which can help stop ongoing score damage.

For people with higher scores who file due to a sudden event — a medical crisis, job loss or divorce — the drop tends to be more dramatic because there's more distance to fall.

The key context: bankruptcy is often a last resort for people already experiencing serious credit damage. In those situations, the filing may not make things dramatically worse than they already are, and it can clear the path to a structured recovery.

How To Rebuild Your Credit After Bankruptcy

You don't have to wait until the bankruptcy falls off your report to start improving your credit. Many people see meaningful improvement within 12 to 24 months of discharge by taking consistent, deliberate steps.

Step 1: Pull your credit reports. Within 30 days of your discharge, get your free reports from all three bureaus at AnnualCreditReport.com. Check that every account included in the bankruptcy is correctly marked as "discharged in bankruptcy" — not still showing as an active delinquency. Errors like this are common and can suppress your score more than the bankruptcy itself.

Step 2: Open a secured credit card. A secured card requires a cash deposit that becomes your credit limit — typically $200 or more. Use it for one small recurring expense each month and pay the balance in full. Payment history makes up 35% of a FICO Score, so consistent on-time payments are the most powerful rebuilding tool available.

Step 3: Consider a credit-builder loan. These loans are designed for people rebuilding credit. Instead of receiving funds upfront, the lender holds the amount in a savings account while you make monthly payments. Once you've paid it off, the funds are released to you and every on-time payment gets reported.

Step 4: Become an authorized user. If a trusted family member or friend adds you to their credit card account as an authorized user, their positive payment history on that account may show up on your credit report. Choose someone who pays on time and keeps balances low.

Step 5: Keep new balances low. Even as you open new accounts, try to keep your credit utilization below 30% — ideally lower. If you have a $500 secured card limit, keeping your balance under $150 supports a healthier utilization ratio.

Step 6: Be patient and stay consistent. Recovery takes time and depends on your full credit profile. FICO research suggests a consumer with a 680 score before filing may take around five years to return to that level, though many people see meaningful improvement well before then by never missing a payment and keeping balances low.

Common Mistakes To Avoid

Avoiding these missteps can make a real difference in how quickly your credit recovers.

• Ignoring your credit reports after discharge. Errors are common, and unresolved reporting mistakes can hold your score down longer than necessary.

• Taking on high-interest unsecured debt too soon. Approval rates improve after discharge, but some offers come with very high rates. Read the terms carefully before applying.

• Closing accounts that survived the bankruptcy. If you kept some accounts in good standing, keeping them open helps preserve your credit history length.

• Applying for a lot of new credit at once. Each hard inquiry has a small impact on your score, so space out new applications as you rebuild.

• Falling for credit repair scams. No service can legally remove accurate bankruptcy information before its reporting window expires. Be cautious of anyone who promises otherwise.

Bottom Line

Bankruptcy can cause a significant drop in your credit score — often 130 to 240 points — and the filing stays on your report for seven to 10 years depending on the chapter you file. The impact is real, but it isn't permanent.

The path forward starts with reviewing your credit reports for errors, opening a secured credit card and making every payment on time. Consistent habits over 12 to 24 months can put meaningful distance between you and the filing, even before it falls off your report.

Key Terms

• Chapter 7 bankruptcy: A type of consumer bankruptcy that discharges most eligible unsecured debts without a repayment plan. It can stay on your credit report for up to 10 years from the filing date.

• Chapter 13 bankruptcy: A type of consumer bankruptcy that reorganizes debt into a three- to five-year repayment plan. Completed cases are typically removed after seven years from the filing date.

• Credit discharge: The legal elimination of a debt through bankruptcy, meaning the borrower is no longer obligated to repay it.

• FCRA (Fair Credit Reporting Act): Federal law that governs how long negative information, including bankruptcy, can remain on a credit report.

• Secured credit card: A credit card backed by a cash deposit, typically used by people rebuilding credit. The deposit usually equals the credit limit.

• Credit-builder loan: A small loan designed to help people establish or rebuild credit history through regular on-time payments.

• Credit utilization: The percentage of your available revolving credit that you're currently using. Keeping it below 30% can support a healthier credit score.

Summary generated by AI, verified by MoneyLion editors

Sources

• myFICO — How bankruptcy affects your FICO Scores

• U.S. Courts — Bankruptcy Basics

• Consumer Financial Protection Bureau — Disputing errors on your credit reports

• Fair Credit Reporting Act, 15 U.S.C. § 1681c — Reporting limits for negative information

• AnnualCreditReport.com — Free weekly credit reports

FAQ

Here are quick answers to common questions about how bankruptcy affects your credit.

How many points does bankruptcy take off your credit score?

The drop depends on your score before filing. According to FICO, someone with a score around 680 could lose roughly 130 to 150 points, while someone starting around 780 could lose 200 to 240 points. People with lower scores before filing tend to see a smaller drop because missed payments and high balances have already pulled their scores down.

How long does bankruptcy stay on your credit report?

Under the Fair Credit Reporting Act, a bankruptcy can be reported for up to 10 years from the filing date. Chapter 7 generally stays the full 10 years, while the credit bureaus typically remove completed Chapter 13 cases after seven years because you repay part of your debt. Either way, the clock starts when you file, not when your case is discharged.

Can you rebuild credit while bankruptcy is still on your report?

Yes. You don't have to wait until the bankruptcy falls off to start improving your score. Opening a secured credit card and making on-time payments, taking out a credit-builder loan or becoming an authorized user on someone else's account can all help you build positive history. Staying consistent is what drives recovery.

Is Chapter 7 or Chapter 13 worse for your credit?

The initial score impact is generally the same for both. The main credit difference is how long each stays on your report — Chapter 7 up to 10 years, Chapter 13 typically seven. Because Chapter 13 falls off sooner, scores tend to recover faster, and some lenders may view it more favorably since it involves repaying a portion of the debt.

Does bankruptcy affect your credit if your score was already low?

If your score was already low — because of missed payments, high utilization or charged-off accounts — the additional impact from bankruptcy may be more modest, and discharging those problem accounts can help stop ongoing damage. That said, the bankruptcy notation itself still appears on your report and signals risk to lenders, so the practical borrowing effects remain significant.