Credit Rating and Bankruptcy
- 15 Dec 2021
Your credit rating will be negatively affected for 6 years if you go bankrupt. However there are some forms of credit you can continue to use.
Included in this article:
- How is your Credit Rating affected by Bankruptcy?
- What credit can you continue using?
- How quickly does your Credit Rating improve after Bankruptcy?
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How is your Credit Rating affected by Bankruptcy?
You will normally remain bankrupt for 12 months. However your credit rating will be affected for longer than this.
A record that you are bankrupt will be added to your credit file. It will be added the same day as the date you go bankrupt. It will then remain on your file for 6 years from that date.
During this six year period if anyone carries out a credit check against you they will discover that you are or have been bankrupt. The outcome of this is that your application for credit may be turned down.
In terms of your credit rating bankruptcy is no worse than any other debt management solution. An IVA will also negatively affect your credit rating for 6 years. A DMP may affect it for even longer.
What credit can you continue using while you are Bankrupt?
Most of your unsecured credit facilities will be cancelled once you go Bankrupt. Accounts such as your credit cards and overdraft facilities are all included in the procedure.
However you can continue to use some forms of credit. If you have a mobile phone on contract you will normally be able to keep this as long as you maintain the payments. Your other household utility accounts will also continue as normal.
You will face issues if you want to change your mobile phone provider. You are unlikely to pass a new provider’s credit check. As such at the end of your current contract you will have to remain with the same provider or choose a pay as you go service.
If you pay for car insurance on a monthly plan you should be able to continue with this while you are bankrupt. However a new application to a different insurer for a pay monthly deal may be declined.
How quickly does your Credit Rating improve after Bankruptcy?
After you are discharged from bankruptcy your credit rating will remain affected for a number of years. It will take 6 years from the date you went bankrupt for the record to be deleted from your credit file altogether.
However there are some things you can do to improve your credit rating as soon as you are discharged. One of these is to start building up a record of using credit responsibly. A good way of doing this is with a Credit Repair Credit Card.
You may want to apply for a mortgage after Bankruptcy. Perhaps surprisingly this is not as difficult as you may think. There are a number of lenders who offer mortgages to people who have been bankrupt. It is possible to get a reasonable mortgage deal after 3 years of going Bankrupt.
Generally speaking it is best to wait at least 3 years from the start date of your bankruptcy before applying for a mortgage. The longer you wait the smaller deposit you will be required to put down.