We filed bankruptcy four years ago and it was discharged in 2016. How long do we need to wait before we can qualify for a mortgage? We stopped borrowing money after our bankruptcy and basically paid cash for everything. We are now concerned that we don’t have any good credit. What should we be doing to build our credit scores? Since the bankruptcy was discharged in 2016, is it still negatively impacting our credit scores?

Slayton, Clifton

Dear Slayton,

You ask some excellent questions. When you filed for a bankruptcy, it was most likely a Chapter 7 or Chapter 13. A Chapter 13 will stay on your credit report for seven years from the filing date. A Chapter 7 will stay on a credit report for 10 years from the filing date. All creditors included in the bankruptcy will remain on your credit report for seven years, whether it was a Chapter 7 or 13.

A bankruptcy can initially have a significant impact on your credit score by up to 100 points or more. It will have a negative impact on your score while it is on your credit file, but since it was discharged over three years ago, you should see less of an impact on your score. It will continue to have a small impact on your score until the bankruptcy falls completely off your credit report. Most people fall into one of two categories years after their bankruptcy is discharged. Those that continue to have low scores and those that have rebuilt their credit.

Many people that file bankruptcy want to avoid borrowing money again. While it may be difficult to qualify for an unsecured credit card, I encourage you to get two or three secured credit cards and/or lines of credit to reestablish your credit. Most banks and credit unions offer secured credit cards or lines of credit. You provide them a small amount of money (collateral) to establish a credit limit, and then use them the same way as an unsecured credit card. Most important, make sure they will report to all three credit bureaus (Equifax, Experian and Trans Union) so you get credit for these new accounts and your payment history. Keep your balances low and make your payments on time. This will be the best way to build new credit and improve your credit score.

In addition to your bankruptcy appearing under public records on your credit file, most creditors included in the bankruptcy will show “included in bankruptcy”, which will also negatively impact your score. Occasionally these creditors will continue to report the account after the bankruptcy is discharged, since they can do this for seven years. By continuing to report it, this will bring the reporting date current, and it will continue to have a negative impact on your scores.

If your bankruptcy was discharged in 2016, I have good news for you. You may be able to qualify for an FHA or VA loan now since the waiting period is two years from the discharge date. USDA is based on three years from the discharge date to the date of the loan application, and FNMA or FMAC (also known as conventional loans) is four years from the discharge or dismissal date.

There are specific loan limits and guidelines for each of these loan programs so I encourage you to meet with your lender to determine which loan you could qualify for at this time.

Thanks for your great questions, and I hope this provides you a plan to rebuild your credit so you can apply for a mortgage in the near future.

Jim Kaiser

Branch Manager, NMLS


Cherry Creek Mortgage


Do you have a question about mortgages or home lending? Send it to jkaiser@ccmclending.com and Jim Kaiser will personally answer it in this space. Some questions may be more technical in nature than others and require more time to research. Due to volume a response cannot be guaranteed to every question.



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