Rebuilding Credit After Bankruptcy

 One of the reasons you might file bankruptcy is to get out from underneath the daunting debt that has piled up over time.  But how do you build your credit back up after your bankruptcy case is discharged?  Many individuals will want to purchase a home or motor vehicle in the future and it is hard to do so without any credit.  Rebuilding credit after a bankruptcy case be done but it all depends on your actions moving forward.

The first thing I recommend to clients is to obtain a secured credit card.  A secured card is a card where you have to put a deposit on file with the company in exchange for an extension of credit.  Typically you start out with a small balance but as long as you make payments over time the balance can increase.  Additionally, some lenders will upgrade your secured card to an unsecured card after a history of creditworthiness.  Secured cards are key when rebuilding credit because unlike debit cards or prepaid cards these secured cards report to the three main credit bureaus.  Depending on how responsible you are when using this credit determines the positive or negative effect the card will have on your credit score.

Make regular payments

When rebuilding credit, keeping a secured loan (such as a car loan or home mortgage) after your bankruptcy case has concluded will have positive impacts on your credit.  If you continue to make your payments on these debts that are reaffirmed in your bankruptcy case, the continued payment history will be positive information that will be reported to the credit bureaus.  This positive payment history will have a positive impact on raising your credit score once your bankruptcy case is finished.  Also, when rebuilding credit after bankruptcy it is good to have a mix of different accounts moving forward (i.e. installment account, credit card, etc.).