Bankruptcy’s stain can last 10 years, but being responsible can soften blow

Q.If a bankruptcy is to last seven years on my credit report, why is it still there if my bankruptcy was in April 2002? Do bankruptcies stay on reports for 10 years? I have tried to dispute it, with no results. – Michelle

A.I hope your past financial challenges are behind you for good.

A bankruptcy negatively affects your FICO score regardless of the type. I spoke with Nick Warrick of ACRAnet, who has been in the credit history business since 1966. His company specializes in reporting for small businesses. Warrick says a bankruptcy will be on your credit history for 10 years. ACRAnet gets its information from the three major credit rating agencies: Equifax, Transunion and Experian. After seven years it becomes less of an influence, but it depends on the creditor as to how it will weigh that history.

Warrick says it helps if a person with a bankruptcy in their past explains why the bankruptcy occurred in the first place and what steps have been taken so it doesn’t happen again. Was it due to unemployment? Was it a result of an injury or illness that no longer afflicts you? Explaining the reason behind why you walked away from your debt could help you secure a new loan.

Companies that lend money only do so because they want their money back with interest. If you have a past bankruptcy, that tells potential creditors you walked away from a past obligation and may not be credit-worthy. Creditors want to see that you have the ability to pay your bills on time and are living within your means.

An online resource I found helpful was www.myfico.com, which has a credit education section with resources to improve your credit history. In general, a bankruptcy will affect your records for the following duration:

•Chapter 11 and Chapter 7 bankruptcies: up to 10 years.

•Completed Chapter 13 bankruptcies: up to seven years.

Another resource, at moranlaw.net, states, “Your bankruptcy can be reported on your credit report for 10 years from the filing of the case. If you file a bankruptcy and voluntarily dismiss it before the discharge, the credit reporting agency must report the dismissal as well as the bankruptcy filing.”

No one wants to file bankruptcy, but sometimes it may be inevitable, and you will have that stain on your credit history for as long as 10 years. Be willing to be honest about why you got into a financial pinch and what changes you can make so it does not happen again.