building credit after a bankruptcy

Repairing Your Credit Rating after a Bankruptcy


5 August,2013

One of the most financially devastating actions you can take is to declare bankruptcy. Your bankruptcy filing is reported under the credit payment history portion of your credit report. That is the factor that weighs most heavily in the calculation of your score.

As a result of this reality, a bankruptcy can result in a much, much lower credit score. Recovering from that situation can take time — especially since a bankruptcy can remain on your credit report for up to 10 years.

How to Start Repairing Your Credit Following a Bankruptcy

Now that you have settled your bankruptcy situation, it’s time to immediately start rebuilding your credit. This means you need to log plenty of positive actions in order to overwhelm the one big negative consequence. Here are some things you can do to help your credit rating recover from a bankruptcy:

  • Pay your bills on time: This is one of the most important things you can do to repair your credit. No more missed bill payments, and you will have something positive show, especially if the payments are on credit-related accounts.
  • Get a credit card: You have to be careful about this step. However, it is necessary. If you don’t have positive experiences to populate your credit report, you might end up with a lower score for longer. If you can, try to maintain at least one open line of credit through the bankruptcy. If this isn’t possible, you might need to apply for a secured credit card to begin rebuilding your credit.
  • Apply for another loan: After a year or two, depending on the type of loan, you should be able to get a fairly low-amount installment loan, like a car loan or a personal loan. This can help you rebuild your credit as you make your payments on time and in full.
  • Fix your poor credit habits: Make sure that you have addressed the problems underlying your credit problems. You want to make sure that you have good financial and credit habits going forward so you don’t wind up in the situation again.

You can also get the help of credit repair services if you are feeling overwhelmed after a bankruptcy. While you can take care of credit repair on your own, sometimes it’s nice to have a professional help you through it. Just make sure you do your research and choose a reputable credit repair company so that you aren’t paying high fees with little lasting result.

It’s also worth noting that you can add a personal statement to your credit report. You can explain any extenuating circumstances (like medical bills) that led to your bankruptcy, and describe the steps you are taking to stay out of financial trouble in the future. Some lenders will look at that statement and allow for a little flexibility when deciding on your loan.

Recovering from a bankruptcy requires time and planning. You won’t see your credit rating restored overnight. But with some persistence and good financial habits, you can eventually put your bankruptcy behind you.