Does your credit score increase when you start bankruptcy?

[Yunior4GT]

Hello,

I just filed for chapter 7 BK about 3 months ago and should be getting my discharge sometime by the end of this month. I noticed that my credit score went from 541 to 612 which is what its at now. Am I missing something here? I thought bankruptcy was supposed to hurt and drop your credit score?

Has anyone had this same thing happen to them?

Should I be excited about this or is it something that will just drop later on?

Let me know what you guys think.

Thanks

[LadyInTheRed]

It might drop again, it might not. Your credit report before you filed probably showed you had lots of debt and a high utilization rate. You filed BK and all those balances and your utlization rate probably went to zero. That makes you look like a better credit risk. I have read of many people whose scores went up after discharge. It may be that they didn't bother checking before discharge.

[Yunior4GT]

It might drop again, it might not. Your credit report before you filed probably showed you had lots of debt and a high utilization rate. You filed BK and all those balances and your utlization rate probably went to zero. That makes you look like a better credit risk. I have read of many people whose scores went up after discharge. It may be that they didn't bother checking before discharge.

Well, I hope it stays at 612 That would be a great boost for me. I know that it takes a lot to start getting credit again but with this score plus a car loan that I will be planning to get in about 6 months from now it should really help my credit get back up. Thanks for your response.

[kornellred]

Credit scores remain static until an event is reported, at which point the score goes up or down depending on the nature of the report. Since your score went up after filing, it seems likely that the full negative effect of an accomplished bankruptcy discharge in the public record has not yet been accounted for. When the credit reporting agencies receive official notice of the discharge, your score will probably go down, but perhaps not to the extent that it went up after filing.
Once the discharge is a matter of public record and reported to the credit reporting agencies, the only way for the score to improve is to utilize credit and maintain a spotless payment record. Of course, your ability to obtain reasonable credit terms will depend on your credit score to begin with. Official credit inquiries will reduce your credit score by several points for each occurrence.

[scotthay]

So you are saying that the federal court notice of chapter 7 bankruptcy filing that showed up on my credit report almost immediately after filing didn't drop my credit score, but some notice now that I am recently discharged will show up that is going to lower it? Mine went up 106 points once the collections accounts came off, but my credit report did show at that point that I had filed chapter 7.

[kornellred]

Filing for bankruptcy and actually receiving a discharge are two separate events. Perhaps the total credit score damage is done when filing for Chapter 7 under the assumption that the whole process takes only a few months - I can only speculate about that. I do know that during my own Chapter 13, my credit score was about 670 and as soon as I received my discharge, my score dropped to 630. But there was never a time between filing and discharge where my score went up. Then again - I never bothered to check since my credit score is totally irrelevant to me.