Bankruptcy And Credit
How long after bankruptcy can I get credit?
One of the main consequences of going bankrupt is that is has a significant knock-on effect on your credit rating. A bankruptcy order stays on your credit file for several years, impacting your ability to get everything from a mortgage to a mobile phone contract.
Our guide looks at how long your bankruptcy affects your credit rating and how quickly you can get credit after being made bankrupt.
- What are the restrictions on getting credit during my bankruptcy?
During the period of your bankruptcy, you are subject to a number of restrictions. One such restriction is that you are legally bound to tell a lender that you are bankrupt if you are applying for credit of more than £500.
This means that until your bankruptcy is discharged, you are unlikely to be able to obtain any credit at all. This is typically 12 months from the date of your bankruptcy order.
- How does my bankruptcy affect my credit rating?
Your bankruptcy remains on your credit reference file for six years from the date of the bankruptcy order. Even if you have been discharged and have told the credit reference agencies, the record of your bankruptcy will still stay on your file for six years.
When you have been discharged from bankruptcy you can ask your creditors to mark any debts included in your bankruptcy as ‘satisfied’ or ‘settled’. You should write to all the creditors who were included in your bankruptcy and give them proof of your discharge from bankruptcy. They can then change the information on your credit reference file.
After six years, the credit reference agencies will automatically remove the bankruptcy entry from your credit reference file.
If you apply for any credit within six years of the date of your bankruptcy order, a potential lender will be able to see that you have been bankrupt. While this may not automatically mean you will be declined for credit, it is likely to make getting credit more difficult.
- How long after bankruptcy can I get credit?
Once your bankruptcy restrictions have been lifted – normally once your bankruptcy is discharged – you can apply for credit straight away.
However, you are likely to find that organisations might refuse to give you credit or other financial services simply because you have been bankrupt in the past. This is especially true if your bankruptcy happened quite recently.
If you do manage to find an institution who will lend to you, it is possible that they will charge you a higher interest rate. This is because they will see you as a high-risk customer because of your previous bankruptcy.
The truth is that getting credit is likely to be difficult while the bankruptcy order remains on your credit file. However, showing that you can responsibly manage credit – perhaps with a high interest credit card – is likely, in time, to improve your chances of getting credit.
While your bankruptcy will disappear from your credit file after six years, some mortgage lenders will ask if you have ever been bankrupt. This means that your bankruptcy could affect your creditworthiness forever.
- What to do next?
If you are experiencing debt problems then you may be considering bankruptcy. However, going bankrupt could have a significant impact on your ability to obtain credit in the future. Consequently, it is wise to speak to a debt professional before making any decisions. There may be other options open to you which won’t have the same impact on your creditworthiness.