Post-Bankruptcy Credit Repair

Bankruptcy relieves your obligation to pay some or all of your debt, but it trashes your credit score in the process. You can expect the bankruptcy listing to stay on your credit report for up to 10 years. Though it will be less damaging as time passes, you’ll have to do some work on your credit if you want to qualify for major credit cards and loans.

Keep Some Accounts Open and Active

If you haven’t already completed your bankruptcy, consider this: you don’t have to include all your accounts in your bankruptcy. Leaving one or two major credit cards out of your bankruptcy can give you a launching pad for your post-bankruptcy credit repair. Make sure the accounts are in good standing and have a minimum payment you can afford. If you don’t have accounts that meet these criteria, don’t worry; there are ways to get a credit card after bankruptcy.

You may have other accounts that weren’t included in your bankruptcy that can help with credit repair. This might be a student loan, car loan, or mortgage. These installment accounts are also good for building your credit score. Keep making your payments on time and contact your lender early if you think you’ll have problems making any of your payments.

Check Your Credit Report

After your bankruptcy is finished, check your credit report to make sure the accounts that were included in your bankruptcy are reported that way. It’s common for bankrupted accounts to continue to be reported as open and delinquent rather than discharged in bankruptcy. Use the credit report dispute process to have these accounts updated and reported accurately.

Get a Credit Card Only When You’re Ready

Wait to get a credit card if you haven’t fixed your spending habits. For example, you may need to focus on living on a budget for a few months. Once you can keep your spending within budget you may be ready for a credit card. It’s a good idea to build an emergency fund before you apply for a credit card. Otherwise, you’ll be forced to use your credit card to cover an emergency – a mistake that could snowball into a huge credit card balance.

Get a Secured Credit Card

There are two types of credit cards: unsecured and secured. You’re probably most familiar with unsecured credit cards that you simply apply for and if you qualify, you get the card. Secured credit cards, on the other hand, require you to make a security deposit against the card’s credit limit. Because secured credit cards typically don’t check your credit, they’re often the best option for post-bankruptcy credit repair.

When you choose a secured credit card, make sure you get one that reports to the major credit bureau. The best secured credit cards also covert to unsecured credit cards within six to eighteen months of timely payments.

Use Your New Credit Wisely

Once you get a new credit card, use it wisely to help repair your credit. Charge only a small portion of your credit limit – 30% is best. Pay your credit card balance in full and on time every month. Paying your balance in full ensures that you don’t run up a credit card balance you can’t afford to repay. Keeping your balance below 30% of the credit limit will help you maintain an affordable balance.