How to Rebuild Credit After Bankruptcy – 5 Steps to Follow


Bankruptcy provides an opportunity to start over financially, but rebuilding credit may be difficult at first.

Learning how to rebuild credit after bankruptcy is important – in fact, it is essential. You do not want to wind up back in the same position of too much debt.

If you have continued making auto loan or mortgage payments during and after your bankruptcy, you are already on the way to re-establishing credit. It is vital that you continue making these payments on time. This shows lenders you are a good risk.

Although bankruptcy remains on your credit report for up to ten years, it does not have to take that long to rebuild credit.

5 Steps to Rebuilding Credit after Bankruptcy

The following 5 steps for how to rebuild credit will help you repair your financial status after your bankruptcy is discharged:

Create a Budget

Since credit counseling was required for your bankruptcy, you have hopefully created a budget that you now follow. That is the first step to rebuilding your credit. You need a monthly plan that will help you live within your means.

Review Your Credit Report

You are entitled to a free copy of your credit report from Experian, Equifax, and TransUnion once every 12 months. You can also go to to receive a free copy of your report. Check your report carefully to ensure that errors are not going to stand in the way of re-establishing credit.

To continue tracking credit, some people choose to request only one report at a time. This way you can use each of the three reports at four-month intervals throughout the year.

Build an Emergency Fund

The current recommendation is to have six months of expenses in reserve. That may not always be possible, but you should have a minimum of at least $250 in a savings account for unexpected expenses to prevent falling behind. Work towards a goal of one month, then three months of savings.

Create a Credit Strategy

Once you complete the prior 3 steps, you can create an action plan to rebuild credit slowly and responsibly. Your bankruptcy eliminated your debts, but it did not erase your past credit reports. Lenders will want to see you take action to be a responsible consumer. Determine the best way to secure credit so that you can start showing you will make full payments each month.

Your credit strategy should include paying all bills in full – once you carry a balance, you risk falling back into the same trap that led to your bankruptcy. Timely payments are the best way to raise your credit score.

Secure New Credit

You have a variety of options for securing new credit:

Secured credit card – in this case, you receive a credit card (often with a high interest rate and annual fee) with a limit equal to the amount of money you put on deposit

Get a gas or retail credit card – to start to rebuild credit, credit cards from retailers and gas purveyors are often easier to acquire

Secured loan – borrowing money against money you have on deposit

Open a new bank checking or savings account – this helps demonstrate financial stability

Credit Co-Signer – asking a relative or friend to co-sign new credit may help you get approved

Authorized User – someone places you as an authorized user on his or her account (verify that your payments are reported to the credit bureaus to help you rebuild credit)

Get a new car loan – your rate may be higher without a co-signer, but this is an excellent way to reestablish credit – the car becomes the loan’s security

Before applying for credit, do research to verify you are a candidate for approval. Getting turned down when you begin to reapply for credit can be harmful to the process.

Be very careful when using credit cards after bankruptcy to avoid falling into debt again. Be patient, you can rebuild credit after your bankruptcy, but it takes time to prove that you are a good credit risk.

For answers to your questions about bankruptcy, please contact Coral Springs attorneys Brodzki Jacobs & Associates, PL at (954) 344-7737.

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