In a word: yes; bankruptcy will always have a profound affect on your credit score regardless of the circumstances or where you live. However, realistically this is not as much of an issue as it may seem since most people that are facing bankruptcy are already having an extremely difficult time paying their bills. In fact, there have been quite a few cases where an individual’s post bankruptcy score actually went higher than their pre-bankruptcy score.

The basic idea behind keeping track of your credit history and having a credit score is to help lenders determine the level of risk you represent. The higher the risk you represent, the less likely lenders are to loan you money on favorable terms. Instead, the risk you represent is offset by less than favorable terms such as smaller loan amounts, higher interest rates, and shorter amortization periods. The smaller loan amounts mean that the lender is unwilling to lend you as much money as might otherwise be the case. The higher interest rate means that you will be expected to pay more for the loan than someone that represents a lesser risk. The shorter amortization period means that the time span of the loan will be shorter amounting to larger monthly payments than would otherwise be the case.

Since the lenders can justify all of the measures described above against people with bad credit, these ostensibly riskier loans are actually quite profitable. As a consequence, it can be fairly easy to get a loan – though with bad terms – immediately after a bankruptcy. These loans can actually be more difficult to obtain if you have a bad credit record without a bankruptcy and are carrying a lot of unresolved, outstanding debt on your record. In these cases, getting a bankruptcy may result in a slight increase of your credit score, though you will still only qualify for loans on generally bad terms.

One of the worst things about bankruptcies is that unlike most other debt issues reported on your credit report, they stay there for a full ten years from the end of the case, as opposed to the more standard seven years that applies to most debt. Contrary to some of the claims made by shysters online, a bankruptcy cannot be legally removed from your credit history without engaging in illegal identify theft or file segregation scams that will likely result in prison time when you are caught. Although you can build up your credit score fairly quickly after bankruptcy, you will never have a really good one until the bankruptcy is no longer listed on your credit history.

Despite this, you can still have a fairly reasonable credit score within a couple years of a bankruptcy. Although it will not be sterling and you will still be expected to pay more for loans than someone with a better credit score, you can still do reasonably well. In most cases, assuming you take great care to maintain a perfect credit record after the bankruptcy, within two years you can qualify for a full mortgage and other major loans.