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Filing for bankruptcy is a major decision that can provide relief from overwhelming debt, but it also has long-lasting consequences, particularly when it comes to your credit. A bankruptcy will stay on your credit report for seven to 10 years, potentially making it harder to obtain new credit or loans, and sometimes even qualify for jobs or housing. Here’s a closer look at how Chapter 7 and Chapter 13 bankruptcies impact your credit and what you can do to minimize the financial fallout.

How Long Does Bankruptcy Stay on Your Credit Report?

Bankruptcy can stay on your credit reports for seven to 10 years, depending on the type of bankruptcy you file. Chapter 7 and Chapter 13 bankruptcy are the most commonly filed types of bankruptcy for individuals, and each has different rules and credit impacts. Chapter 7, which discharges most debts, remains on your credit reports for a longer period; Chapter 13, which involves a repayment plan, stays on your reports for a shorter duration.

It’s important to note that even though bankruptcy stays on your credit reports for many years, its impact on your credit scores diminishes over time, especially if you take steps to rebuild your credit.

💡 Quick Tip: Your credit score updates every 30-45 days. Free credit monitoring can help you learn about your score’s normal ups and downs — and when a dip is cause for concern.

When Is Bankruptcy Removed From Your Credit Report?

Bankruptcy will automatically fall off your credit reports after a set period of time, which varies by type of bankruptcy. The clock starts from the date you first file for protection from the court, not the date of discharge or when the bankruptcy procedure ends. Here’s how long each type of bankruptcy stays on your credit reports:

Chapter 7 Bankruptcy: 10 Years

With Chapter 7 bankruptcy, also known as “liquidation” bankruptcy, a trustee liquidates your assets (with some exceptions), then distributes the proceeds among your creditors. If those funds aren’t enough to cover all of your dischargeable debts, your obligation to pay any remaining debt is eliminated. Since Chapter 7 completely wipes away most of your debt, the consequences to your credit are relatively severe. As a result, Chapter 7 bankruptcy stays on your credit reports for 10 years from the filing date.

During this period, your bankruptcy will be visible to potential lenders, landlords, and employers who check your credit reports. Although the bankruptcy’s impact on your credit scores lessens as time passes, its presence can still make it harder to secure favorable credit terms or loans for up to a decade.

💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.

Chapter 13 Bankruptcy: Seven Years

Chapter 13 bankruptcy, also known as “reorganization” bankruptcy, allows filers to repay their debts over a period of three to five years through a court-approved repayment plan. Unlike Chapter 7, Chapter 13 allows you to keep your assets and work with creditors to pay off some or all of what you owe. At the end of the repayment period, any remaining eligible debts are discharged.

Because Chapter 13 involves a repayment plan and demonstrates an effort to pay back some of what is owed, it remains on your credit reports for a shorter time — seven years from the filing date. After this period, the bankruptcy automatically falls off your credit reports, allowing them to be free of any bankruptcy records.

Can You Remove Bankruptcy From Your Credit Report?

Barring any errors, you generally can’t get a bankruptcy removed from your credit reports. If, however, your credit report says you filed bankruptcy but you did not, or there is any other kind of inaccuracy (such a bankruptcy entry that stays on your credit report past its expiration date), you have the right to dispute the inaccuracy with the credit bureau that compiled the credit report. A dispute doesn’t hurt your credit score and must be addressed by the bureau within 30 days.

Where Does Bankruptcy Appear on Your Credit Report?

Bankruptcy filings typically appear in the “Public Records Information” section of credit reports. While bankruptcy courts don’t directly report information related to bankruptcy cases to the credit bureaus, the three major credit bureaus (Equifax®, Experian® and TransUnion®) collect bankruptcy information from court records, which are open to the public.

As part of your bankruptcy entry, you may see information such as:

•   Type of bankruptcy

•   Status

•   Dates filed and closed

•   Liability amount

•   Exempt amount

•   Amount paid

•   Estimated date of when your bankruptcy should be removed from the credit report

Bankruptcy may also appear on your credit reports under specific accounts. Any accounts that were included in the bankruptcy, such as credit cards or loans, may be noted as “discharged” or “included in bankruptcy.”

What Does Bankruptcy Do to Your Credit Score?

Payment history is the most important factor in your credit scores, so a bankruptcy can take a significant toll, knocking as much as 200 points off your score, according to Experian.

Exactly how bankruptcy will impact your scores, however, will depend on where they stand before you file. For many people, the time leading up to a bankruptcy may include missed payments and accounts in collections — all of which would already cause a major drop in your credit scores. A bankruptcy is more likely to cause significant damage if you didn’t have a lot of negative payment history beforehand.

Either way, the impact of bankruptcy on your credit scores lessens over time. If you take positive steps, such as making timely payments on new accounts and keeping your credit utilization low, you can start building your credit even while the bankruptcy is still on your report.

How to Rebuild Your Credit After Bankruptcy

Rebuilding your credit after bankruptcy takes time, but there are things you can do to help speed up the process. Here are some proven tactics to try.

•   Check your credit report regularly: You can get free copies of your credit reports from each of the three major credit bureaus at AnnualCreditReport.com. When scanning your reports, check to see that the bankruptcy and related accounts are reported accurately. Be sure to dispute any errors that may be dragging down your score unnecessarily.

•  Make all payments on time: Payment history is typically the most important factor in your credit scores, accounting for 35% of the FICO score. To build a positive payment history, you’ll want to pay all of your bills on time and in full. Using a spending app can help keep you on track by ensuring you have sufficient cash available to cover your bills as they come due.

•  Keep credit utilization low: If you have access to credit, aim to use no more than 30% of your available credit limit at any time. This shows that you’re managing credit responsibly.

•  Get a secured credit card: A secured credit card requires a deposit that acts as your credit limit. Using this card regularly and paying off the balance in full each month establishes a positive payment history that can help rebuild your credit.

•  Consider a credit-builder loan: Consider a credit-builder loan: With a credit-builder loan, the lender deposits the loan amount into a savings account, which you cannot access until you finish repaying the loan. Your payments to the lender are reported to the credit bureaus, generating a positive payment history on your credit reports. When you finish paying off the loan, you gain access to the cash.

Recommended: How to Check Your Credit Score Without Paying

The Takeaway

Whether you’re figuring out if bankruptcy is the right choice for you or have already started the process, know that it’s not a permanent part of your credit profile. It will take seven to 10 years to drop from your reports, but bankruptcy’s negative impact can diminish before then, especially if you manage your money responsibly and proactively work to rebuild your credit.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Can Chapter 7 be removed from credit before 10 years?

Chapter 7 bankruptcy generally stays on your credit report for 10 years from the filing date, and it’s difficult to remove it before that time. However, if there’s an error on your credit report or if the bankruptcy is not verifiable with the court, you can dispute it with the credit bureaus. If the dispute is successful, it may be removed early.

How long does Chapter 7 stay on your credit?

Chapter 7 bankruptcy remains on your credit reports for 10 years from the filing date. During this time, the bankruptcy will be visible to lenders, landlords, and others who check your credit report. Although the bankruptcy remains on the report for a decade, its impact on your credit score lessens over time, especially if you take steps to proactively rebuild your credit.

Can you have a 700 credit score after Chapter 7?

Yes, it is possible to achieve a 700 credit score after Chapter 7 bankruptcy, though it may take time. Rebuilding credit after bankruptcy requires careful financial management, including paying your bills on time and keeping your credit utilization low. Taking out a secured credit card or credit-builder loan, and managing repayment responsibly, can also help you rebuild your credit after Chapter 7 bankruptcy.

Photo Credit/ iStock Photo:Viorel Kurnosov
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SORL-Q324-031

Your credit reports contain a record of your borrowing and repayment history, including both positive and negative information. Negative entries (the kind that can hurt your scores) generally stay on your credit reports for seven years. By contrast, positive information (which can help build your credit) typically remains on your credit reports for at least 10 years, and can remain indefinitely.

Here’s a basic primer on what information goes on your credit reports, including how these entries affect your credit and how long they stay there.

What Is a Credit Score?

A credit score is a number designed to predict how likely a person is to repay a loan, based on their credit history. Credit scores generally range from 300 to 850, with higher scores indicating better credit health. Lenders and other creditors use your credit score to determine whether or not to approve your application for financing. Credit scores are also used to determine the interest rate and credit limit you receive.

You actually don’t have just one credit score, but several. The reason is that credit scores can be calculated using different credit reports (we each have three, one from each of the major consumer credit bureaus) and different scoring models. The two most commonly used scoring models are FICO® and VantageScore®.

Here’s a look at some of the main factors that affect your credit scores:

•  Payment history: How consistently you pay your bills on time.

•  Amounts owed: The total amount of debt you currently owe

•  Credit utilization: How much of your available credit you’re using

•  Length of credit history: How long you’ve had credit accounts open.

•  New credit: How often you apply for new credit.

•  Credit mix: The variety of credit types you have, such as credit cards, mortgages, and car loans.

•   Negative events: Whether you have had a debt sent to collections, a foreclosure, or a bankruptcy, and how long ago.

💡 Quick Tip: Your credit score updates every 30-45 days. Free credit monitoring can help you learn about your score’s normal ups and downs — and when a dip is cause for concern.

What Is a Credit Report?

A credit report is a detailed record of your credit history compiled by one the three major credit bureaus — Equifax®, Experian® and TransUnion®. The bureaus collect and store financial information about you that is submitted to them by creditors (such as lenders and credit card companies). Creditors are not required to report to every credit bureau. As a result, your three credit reports may contain slightly different information. Your credit report updates when creditors send new information to the credit bureaus, which generally happens every month or so.

When you apply for credit, lenders will typically check one or more of your credit reports to determine your ability to repay loans. Negative information on your reports can signal higher risk and make it hard to secure credit or result in higher interest rates.
You can access free copies of your credit reports by visiting AnnualCreditReport.com.

How Long Does Positive Information Remain on Your Credit Report?

Positive information — such as timely payments and accounts in good standing — can remain on your credit report for up to 10 years. For example, an account that’s paid off in good standing (meaning there are no late or missed payments) will stay on your report for 10 years after the last payment was reported. This positive information can help maintain, or even build your credit, as it reflects your ability to handle credit responsibly.

Active accounts that are in good standing will continue to show up on your credit report indefinitely. Keeping these accounts open and in good standing can contribute positively to your credit history for as long as they are active.

How Long Does It Take for Information to Come off Your Credit Report?

Negative information doesn’t stay on your credit reports forever, but how long it remains depends on the type of negative entry:

•   Late payments: Payments made 30 or more days late can remain on your credit reports for seven years from the date of the missed payment. Even if you bring the account current, the late payment entry remains.

•   Collection accounts: When an unpaid debt is sent to a collection agency, a separate collections account will appear on your credit reports and stay there for seven years from the date of the original delinquency.

•   Bankruptcies: Chapter 7 bankruptcies stay on your credit report for 10 years from the filing date, while Chapter 13 bankruptcies remain for seven years.

•  Foreclosures: A foreclosure on your home can remain on your report for seven years.

💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.

Will a Lender Getting a Copy of My Credit Report Affect My Score?

Whether a lender checking your credit report can affect your credit score will depend on the type of credit check they do.

Hard inquiry:This occurs when a lender or creditor checks your credit report as part of a credit application process, and stays on your credit report for about 24 months. One hard inquiry won’t have much, if any, impact on your credit scores. Multiple hard inquiries within a short time frame, on the other hand, can have a more significant effect. Fortunately, if you’re rate-shopping for the same type of credit (e.g., a mortgage or auto loan), multiple inquiries within a short period are usually grouped together as a single inquiry for credit-scoring purposes.
Soft inquiry:A soft credit check is what happens when you check your own credit or when a lender preapproves you for an offer without a formal application. Also when an employer, insurer, or utility checks your credit, it’s typically a soft credit check. While soft inquiries remain on your credit reports for two years, they don’t impact your credit score.

Recommended: How Long Does It Take to Build Credit From Nothing?

How to Remove Negative Information From Your Credit Report

While most negative information must remain on your credit reports for a set time period, there are certain steps you can take to remove negative entries:

•  Dispute errors:If there’s inaccurate or outdated negative information on any of your credit reports, you can file a dispute with the appropriate credit bureau online or by mail. The credit bureaus have 30 days to investigate your claim, and if the information is incorrect, it will be removed. Filing a dispute won’t hurt your credit, and could potentially have a positive impact if you’re able to get negative information off your credit reports.

•  Request a goodwill adjustment:If you have a history of on-time payments but made one late payment, you might consider requesting what’s known as a “goodwill deletion.” This involves sending a letter to your creditor, explaining why you were late with a payment, and asking them to remove the negative entry from your report as a gesture of goodwill. Success depends on the creditor, but it can be worth asking if it’s a long-standing account and you’ve generally been a responsible borrower.

•  Wait for negative information to drop off: If the negative information is accurate, your only option may be to wait for it to age off your report. Most negative entries remain for seven years, with some exceptions like Chapter 7 bankruptcy. Over time, however, the impact of negative information diminishes, and practicing good credit habits, such as lowering your credit utilization, can help mitigate its effects.

The Takeaway

Your credit reports contain a detailed history of both positive and negative financial actions, and how long that information stays on your reports varies depending on the nature of the account or event. Positive information, such as timely payments and accounts in good standing, can remain on your reports for 10 years-plus; negative information, such as late payments and bankruptcies, typically stays for seven to 10 years.
While negative entries can take a toll on your credit scores, they don’t remain on your credit reports forever. And even while they are there, their influence lessens over time. To minimize the impact of negative information, it’s important to monitor your credit reports, dispute any inaccuracies, and maintain good financial habits moving forward.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Is it true that after seven years your credit is clear?

It depends on the type of negative entries that are in your credit reports. Late payments, collections, Chapter 13 bankruptcies, and foreclosures typically fall off after seven years. Chapter 7 bankruptcy stays on your credit reports for 10 years.

Can you get negative marks removed from your credit report?

It’s possible to remove negative marks from your credit report, but only if they are inaccurate, outdated, or unverifiable. If you notice any inaccurate information on your credit reports, you can file a dispute with the credit bureaus, either online or by mail. They are required to investigate within 30 days. If they find the information is inaccurate, they will remove it.
Legitimate negative information, however, will generally remain on your credit report until its expiration date.

How long before a debt is uncollectible?

The time after which a debt becomes uncollectible, known as the statute of limitations, varies by state but is generally three to six years. Once the statute of limitations on a debt has expired, creditors can no longer sue you to collect payment, though they can still attempt to collect it. Keep in mind that the debt can remain on your credit reports for up to seven years (and impact your credit scores), even after it becomes legally uncollectible.

Photo Credit: iStock/miniseries
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SORL-Q324-032

The length of time debt relief stays on your credit report depends on the type you use. Most negative items, including debt settlement, stay on your report for up to seven years. But the start time can vary depending on your situation.

What Is Debt Relief?

Debt relief is typically used as another term for settling your debt. That means negotiating with your creditors to lower your outstanding balances and pay them off for a lower amount. This debt payoff strategy is typically reserved for people with large amounts of debt who are struggling with payments and can’t foresee the ability to pay off their balances in the future.

While getting some of your debt wiped out seems like a great plan, there’s a large degree of risk involved, and you’ll also do damage to your credit score.

How Debt Relief Works

There are private companies that offer debt settlement services, but they charge expensive fees and recommend risky strategies while negotiating. Here’s how the process typically works:

•   A debt settlement company may tell you to pause payments on your credit cards. This causes late fees, penalties, and interest to accrue, not to mention major damage to your credit report.

•   In the meantime, you deposit the money you would have paid into a savings account. You may not use your credit cards during this time.

•   The debt settlement company eventually reaches out to your creditors and offers to pay them a settled amount using the funds you saved.

There is no guarantee that your creditors will agree to the settlement. You also have to pay the debt relief company a fee, usually either based on how much you saved or how much you settled. And if you do have any debts discharged, that amount is typically considered taxable income.

Types of Debt Relief Options

There are a few different debt relief options other than debt settlement:

•  Credit counseling: Work with a nonprofit counselor to review your finances and help create a payoff plan for your debt.

•  Debt management plan:” This may be a recommendation from your credit counselor. You pay into a savings account to the counseling organization, who then makes payments to your creditors on your behalf.

•  Bankruptcy: A personal bankruptcy discharges some of your debt, but it requires either a payment plan to creditors for up to five years or selling off your assets to pay your creditors.

How Each Debt Relief Option Affects Your Credit Report

There are multiple categories that affect your credit score, and each debt relief option is likely to cause damage in some way. Here’s what you can expect.

•  Debt settlement: This option can cause major damage to your credit report because payment history is the biggest contributing factor to your score. If you stop making payments, you will continue to accrue separate late payment entries. The debt will also be listed as “settled” on your credit report.

•  Debt management plan: A credit report may indicate any accounts you’ve enrolled in a debt management plan. While that doesn’t directly hurt your credit score, it can be seen by future creditors and may influence their decisions. And if your counselor requires you to close accounts so you don’t charge more, your available credit could drop, hurting your credit card utilization ratio.

•  Bankruptcy: A bankruptcy can cause your credit score to drop by as much as 200 points.

Check your credit score updates frequently as you navigate any type of debt relief.

What’s the Best Debt Relief for Me?

The Federal Trade Commission recommends starting off with strategies you can implement yourself. Making a budget, for instance, can help you track your spending and perhaps make different decisions about where your money goes. Try using a spending app to see what kind of progress you can make.

You can also talk directly to your creditor to create a new payment plan that works for your financial situation, especially if you’re having trouble paying your mortgage.

Debt Settlement vs. Staying Current

There are pros and cons to both options. You’re not guaranteed success with debt settlement, and your credit score could tank if you stop making payments on your accounts. Plus, any amount that is settled is considered taxable income. If you settle a large amount of your debts, that could bump you into a much higher tax bracket.

Staying current with your balances can preserve your credit. But if you’re just making minimum payments, you could see your balance grow as interest continues to accumulate. It’s best to talk to a credit counselor or other financial professional to help you weigh the pros and cons based on your personal situation.

How Long Does Debt Settlement Stay on Your Credit Report?

A debt settlement stays on your credit report for seven years. But your score should start to rebound before then, especially if you take proactive steps to build your credit.

The start date of the seven-year period depends on whether or not you have late payments associated with the account. If there were no late payments when you settled the debt, that settlement date starts the clock on seven years.

But if the account is delinquent or has late payments, the settlement stays on your report from the first late payment in delinquency.

How Debt Settlement Affects Your Credit Score



Debt settlement can hurt your credit score, but it may not cause as much damage as having the account go to collections. However, your accounts will be listed as settled, which is visible to lenders in the future. Although it takes time to improve your credit score after a debt settlement, it can increase before the settlement is removed.

How to Remove Settled Accounts from Your Credit Report

The only way to remove a settled account before the seven-year period is to file a dispute with one of the credit bureaus. This process doesn’t hurt your score, but is only successful if the account has incorrect information listed on your credit report.

How Long Does It Take to Improve Your Credit Score After Debt Settlement?

It depends on many factors, including how you handle your other finances in the months and years following a debt settlement. Proactively taking steps to rebuild your credit can help expedite the process.

How to Improve Your Credit After Settling Debt

Here are some strategies to help increase your credit score after debt settlement.

•   Check your credit report regularly for accuracy. You can get a copy of your report for free once a week from each of the three major credit bureaus. Visit AnnualCreditReport.com to get started.

•   Pay your bills on time.

•   Get a credit card.

•   Pay down any remaining high-interest debt.

Credit Score Tips

Knowledge is power when it comes to managing your credit. Check your credit score without paying to know where you’re starting from immediately after your debt settlement is finalized. Then use a credit score monitoring app to get personalized advice on what tactics to take.

The Takeaway

Any type of debt relief will have some impact on your credit score and financial future. Weigh the benefits and drawbacks of each option to choose the right next step. No matter what you decide to do, regularly checking your credit reports is a smart way to better understand your overall financial health.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Does debt relief ruin credit?

It depends on the type of debt relief you choose. Debt settlement will be listed on your credit report for seven years, but your score could start to rebound before then.

How long does it take to rebuild credit after debt relief program?

There’s no exact timeline for rebuilding credit after a debt relief program. Expect it to take up to two years to start seeing a noticeable difference. Using a credit monitoring service can help you track exactly how much progress you’re making.

Can debt settlement be removed from a credit report?

Debt settlement can be taken off a credit report only if the information is inaccurate. Otherwise, it will take seven years before the settled debt drops off your credit report.

Photo Credit: iStock/Jelena Danilovic
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL-Q324-029

Agreeing to cosign a loan for someone is a generous thing to do, and risky. Such a noble deed will show up on your credit report, but the impact won’t always be positive. On the one hand, your credit score might improve if the primary borrower executes timely payments. On the other hand, if the primary borrower reneges on their financial responsibility, your credit score could take a huge hit.

But there’s more to it than that, so let’s examine what you should consider before cosigning a loan, whether for a friend, family member, or business associate.

What Does It Mean to Cosign a Loan for Someone?

Cosigning a loan means that you agree to be responsible for the debt if the borrower does not or cannot repay the loan. You are not the primary borrower, but you could become the primary payer. You can cosign any type of loan — a personal loan, auto loan, mortgage, home improvement loan, or student loan. You can also cosign a lease or make someone an authorized user of your own credit card, which may have a similar effect on your own financial situation.

Why Would a Loan Need a Cosigner?

Typically, a loan requires a cosigner if the primary borrower cannot qualify to borrow the funds on their own. The reason could be that their credit score is too low, they haven’t built up a credit history, or they don’t have a sufficient or steady income. If any of these apply, a lender will consider them to be at high risk of default and choose not to qualify them for a loan.

How Does Being a Cosigner Affect My Credit Score?

Although you are not the primary borrower when you cosign a loan, your credit score could be impacted. Depending on how good a job the primary borrower does at tracking their money, budgeting, and making payments, cosigning a loan could either boost your score or damage it. Therefore, it’s important to understand how cosigning will affect it.

Risks of Cosigning a Loan

There are serious financial and personal consequences to cosigning on a loan. The biggest risk: Cosigners assume legal responsibility for the debt. If the primary borrower defaults, the cosigner may have to pay the full amount of what’s owed.

If you cosign a loan, it will impact your debt-to-income (DTI) ratio, which is an important factor lenders consider if you apply for a loan. Your ratio may go up if you cosign a loan, making you appear more risky as a borrower, and limiting your ability to obtain credit in the future.
Cosigning may also impact your credit utilization ratio (how much of an allowed line of credit you have used), which is an important factor in computing your credit score.

But there are other potential impacts:

•  If a lender conducts a hard inquiry (a type of credit check) on your credit report as part of the loan application process, this may cause a temporary drop in your score, particularly if you apply for other loans or credit cards within a short period.

•  If a payment is over 30 days past due, the creditor might report the late payment to the credit bureaus, lowering your credit score.

•  If a cosigned vehicle is repossessed, your credit may suffer even if you do not use the vehicle.

•  If the account is sent to collections, your credit score will drop.
The relationship you have with the primary borrower also could be damaged if they fail to meet their end of the deal.

The relationship you have with the primary borrower also could be damaged if they fail to meet their end of the deal.

When Cosigning May Improve Your Credit

Your payment history, credit utilization ratio, and credit mix are three factors used to calculate your credit score, and these could all be impacted when you cosign a loan. Cosigning can positively affect your credit score when a primary borrower makes timely payments and pays back the loan according to the terms.

•   On-time payments by the primary borrower can have a positive impact on your credit score because they add to your payment history.

•   If the loan is paid off according to the terms, this can show that you use credit responsibly.

•   The new debt may add to your credit mix. Successfully managing a mix of debt, such as credit cards and installment loans, can boost your credit score. Maybe you don’t have an installment loan. If you cosign on a well-managed installment loan, such as an auto loan, it indicates to lenders that you are a responsible borrower.

Recommended: Why Did My Credit Score Drop After a Dispute?

Pros and Cons of Cosigning a Loan

The pros and cons of cosigning a loan depend on the situation.

When Should I Become a Cosigner on a Loan?

The decision to become a cosigner on a loan is a personal one, and it depends on the circumstances of everyone involved. You might want to cosign a loan to help someone achieve their financial goals. Perhaps your son or daughter needs you to cosign on a loan for a car, or someone you want to help needs you to cosign on a personal loan to start a business. It’s up to you to understand the risks involved and to assess the borrower’s ability to honor the payments.

Does being a cosigner show up on your credit report? Yes. So it is not a decision to be taken lightly. Before you agree to cosign on someone else’s loan, it would be wise to check your own credit score to make sure it is healthy. If you decide to cosign, implementing a free credit score monitoring app can help you track the impact on your score.

What Are the Responsibilities of a Cosigner?

The cosigner on a loan is legally bound to pay the debt if the primary borrower defaults. The cosigner is just as responsible for the loan as the primary borrower, even though they may not directly benefit from the loan. This is the case even if the primary borrower files for bankruptcy. If you used assets as collateral to help the primary borrower secure the loan, the lender can sell them to recoup the debt.

It is the cosigner’s responsibility to discuss with the primary borrower their ability to manage their budgeting and spending, pay back the loan in a timely manner, and plan what to do if they find themselves unable to meet their financial obligations.

The Difference Between an Authorized User and a Cosigner

Authorized user is a designation used for credit cards. Cosigners aren’t typically accepted for credit cards. Instead, a person can be designated as an authorized user of another person’s credit card. The credit card owner is the person responsible for the debt, and they give permission for the authorized user to also receive a card and use the account.

Here are the main differences between a cosigner and a credit card-authorized user.

What to Consider Before Cosigning a Loan

You will have your own reasons for cosigning a loan. However, here are some things you might want to consider before you take on the risk of another person’s debt.

The Consequences for You

Consider the consequences for your credit score and ability to borrow in the future. If your debt-to-income ratio goes up, your ability to get financing may be reduced.

If you have to assume the payments, creditors can sue you and garnish your wages or bank accounts to collect the outstanding debt. Your credit score updates periodically but the negative impact can persist for up to seven years.

Your Relationship with the Primary Borrower

If the primary borrower benefiting from your generosity manages the payments responsibly, it could strengthen your relationship with that person, However, the opposite could happen if they do not manage the debt well.

How to Monitor the Loan

If you do go ahead and cosign the loan, it’s a good idea to monitor whether the primary borrow is making the payments on time. You might be able to intervene if a problem occurs before the debt is sent to a collection agency. The Federal Trade Commission (FTC) recommends asking the lender or creditor to notify you if the borrower falls behind on their debt. You’ll also want to add the loan to your own personal debt summary so you remember to keep track of it as time passes.

Recommended: How to Check Your Credit Score Without Paying

The Takeaway

Cosigning on a loan can be a way to help another person access credit. However, cosigning a loan can also ruin a relationship and your finances if the primary borrower fails to hold up their end of the bargain.

Before cosigning on a loan, understand what the consequences could be for your credit standing, financial situation, and your relationship. If you decide to go ahead, be clear about the expectations and get an agreement in writing. An agreement won’t absolve you of the responsibility to pay the debt, but it might help in getting the primary borrower to pay you back at a later date when they may be in a better financial situation.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Will my credit score go up if I have a cosigner?

Your credit score could go up if you have a cosigner, because if you are approved for a loan with a cosigner and you make timely payments, it will add positively to your credit history, which will also favorably impact your credit score. Having that cosigned loan could also improve your credit mix, another plus where your credit score is concerned.

Is cosigning bad for your credit?

It can be. If the primary borrower does not make payments on time or if they default on the loan, it will negatively affect your credit. It could also be bad for your credit if your credit utilization ratio increases. However, cosigning for a loan could also be good for your credit if payments are made on time and/or your credit mix improves.

Who gets the credit on a cosigned loan?

Both the primary borrower and cosigner are impacted by the cosigned loan. A cosigned loan typically appears on both credit reports, and the cosigner is responsible for paying back the loan if the primary borrower fails to do so.

Photo Credit: iStock/flzkes
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Yes, in most cases it’s illegal to check someone else’s credit report. The Fair Credit Reporting Act (FCRA) is a federal statute that defines and limits who can receive credit-related information. The act lists legal reasons why someone’s credit can be checked; therefore, it is illegal for an individual or organization to check someone’s credit report for any other purpose.

We’ll do a deep dive into when it’s OK to run a credit check on someone, and what to do if you suspect someone has pulled your credit report without permission.

Can Anyone Check Your Credit?

The short answer is no. Legally speaking, a person or organization can check your credit only under certain circumstances. Someone either needs to have what’s called “permissible purpose” or have your permission and cooperation in the process for the credit check to be considered legal.

Who Can Access Your Credit Report?

People and organizations that can legally access your credit report under certain circumstances include the following:

•   Banks and other lenders

•   Utility companies

•   Insurance companies

•   Landlords

•   Employers

Here’s more about each

Banks and Other Lenders

A financial institute can check someone’s credit in connection with credit-related transactions, such as when they apply for a mortgage or car loan. Note that section 609(g) of the FCRA requires financial institutions that arrange mortgage loans and use credit scores in their decision-making to provide the credit score and additional information to the applicant.

Utility Companies

Although it may not be commonly thought of in this way, applying for utility service is a form of credit. So when someone requests service from an electric company, the utility will likely check the person’s credit history. If the individual doesn’t have at least a fair credit score, the company can request a deposit or even deny service.

Insurance Companies

Insurance companies have permission to review an applicant’s credit information. Note that companies must also comply with state laws as they use the credit data to underwrite policies.

Landlords

The Federal Trade Commission notes that landlords have the right to review consumer credit reports when someone applies to rent from them or renews a lease. A landlord must certify to the credit bureau (such as Equifax, Experian, or TransUnion) that they will only use this information for rental purposes.

Employers

A potential employer can check an applicant’s credit report, although the company must give the applicant notice of their intent and get written permission. State laws vary regarding an employer’s ability to use this information as part of a hiring decision.

When Is It Legal to Run a Credit Report on Someone?

There are a handful of legal reasons to run a credit report on someone.

Permissible Purpose

This umbrella term used in the FCRA describes when a credit reporting agency can provide a credit report.

Proxy Ordering

“Proxy” is a legal term for someone with the authority to represent someone else. The only instance that isn’t proxy ordering is when a consumer requests their own credit report.

To pull your report, a proxy will need to get answers to questions that only you should know — information that comes directly from your credit report. This provides an extra layer of protection to ensure that your permission is freely being given.

Deceased Spouse

An individual can send a letter to a credit agency requesting the credit report of a deceased spouse. The surviving spouse will need to provide information about both parties so that the agency can verify identities and ensure that it’s OK to provide the credit report.

During Mortgage Underwriting

The FCRA notes that a financial institution can obtain a credit report for “extending, reviewing, and collecting credit.” This applies to mortgage underwriting as well as other types of loans.

Screening Job Applicants

With permission, an employer can request and review a credit report for the purpose of “evaluating a consumer for employment, promotion, reassignment or retention as an employee.”

During Insurance Underwriting

An insurance company can check a person’s credit report, with permission, as part of the underwriting process for a policy. The FCRA delves into specifics for different types of insurance: life, health, homeowners, etc.

Recommended: Does Net Worth Include Home Equity

Evaluating Prospective Tenants

The FCRA states that a potential landlord can pull a credit report with the prospective tenant’s permission.

Court-Appointed Guardians

Court-appointed guardians can request a copy of their ward’s credit report by mail. They must provide information about themselves as well as the ward.

What to Do if Someone Pulls Your Credit Without Permission

Contact the organization that pulled your credit to rule out that it was done in error. Then contact the three credit bureaus and request that any hard credit inquiries be deleted from your credit report.

You can also submit a complaint to the Consumer Financial Protection Bureau (visit https://www.consumerfinance.gov/complaint/), and ask for any problems associated with the inquiry to be resolved.

Who Can Check Your Credit Without Permission?

Government agencies may check your credit report to process an application for a license, to determine if you qualify for public assistance, or to calculate what a person can pay in child support, among other reasons.

If you already receive credit from a company, it may periodically check your credit report. Language giving them permission is likely in their terms and conditions. Debt collectors may also get access to information on credit reports.

Recommended: What Is a Tri-Merge Credit Report?

How to Know if Your Credit Was Checked

All hard inquiries will appear on your credit report for two years, so you can find the information there. Soft checks may or may not appear. Each year, you can get a free copy of your credit report — and find out your credit score for free — via AnnualCreditReport.com.

If you’re concerned about credit checks, consider signing up for a credit monitoring service.

What qualifies as credit monitoring varies from service to service; look for one that sends out alerts for new hard inquiries.

How a Credit Check Affects Your Credit Score

A soft inquiry will not hurt your credit score even if it appears on your report. A hard inquiry can lower the score by up to five points. Although the inquiry will remain on your credit report for two years, it will stop affecting your credit score after 12 months. Applying for several credit accounts in a relatively short amount of time may pose a greater risk. (Find out more about what affects your credit score.)

Can You Stop Someone From Getting Your Credit Report?

You can freeze your credit at all three bureaus, which will prevent them from sharing information with businesses that make inquiries. However, if you want to apply for a loan or otherwise conduct a transaction that requires a credit check, you will need to unfreeze your credit.

The Takeaway

The Fair Credit Reporting Act (FCRA) provides legal guidelines on who can and can’t check consumer credit reports. Certain individuals can check your credit with your permission, including landlords and employers. Banks, insurers, lenders, and utility companies may also pull a credit report if you’ve applied for credit or service with them. In some circumstances, government agencies may request your credit report without your permission. In general, an average citizen cannot check someone else’s credit report unless they are serving as a legal proxy.

Want to keep an eye on changes in your credit report? Consider downloading a money tracker app, which can alert you to fluctuations.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Can I sue for an unauthorized credit check?

Consult an attorney to discuss potential legal remedies. If you discover that your credit was run inappropriately without your permission, contact all three credit bureaus to ask them to remove the inquiry so that it doesn’t harm your credit score. You can also file a complaint with the Consumer Financial Protection Bureau at https://www.consumerfinance.gov/complaint/.

What is a violation of the Fair Credit Reporting Act?

There are multiple types of FCRA violations. They include instances when a credit bureau provides your information to someone who is not authorized to receive it, didn’t demonstrate a valid need for the data, or didn’t get your written permission in advance.

How do I find out who ran my credit?

You can get a free copy of your credit report from each of the three bureaus at AnnualCreditReport.com. Your credit report lists all hard credit inquiries from the past two years, and potentially some soft inquiries.

Photo credit: iStock/vitapix

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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