Can I Rebuild My Credit After Bankruptcy?

The tricky part may be gone, but the process has just begun — it’s time to start rebuilding your credit. Here are some of the most effective methods for doing so.

After filing for bankruptcy, your credit score is likely to have suffered a knock, and it’s time to start rebuilding. Here are nine strategies for rebuilding your credit after bankruptcy.

If you’re like most individuals, you’ve discovered that Chapter 7 bankruptcy is only the beginning of a long and fruitful path.

You have a one-of-a-kind chance to restore your credit after having your debts discharged in court. You won’t be burdened by an excessive financial load.

However, this does not rule out the possibility of undesirable consequences. According to myFICO, if your credit was good before filing, you’ll notice a significant decline in your FICO scores. In contrast, if you started with lower scores, you’ll experience a less severe loss. In any scenario, your scores will be towards the bottom of the 300-850 range.

Fortunately, by using wise tactics, you may repair your credit. Here are nine strategies for improving your credit after a bankruptcy.

Tips to Enhance Your Credit After Bankruptcy

1. Double-check that you’ve zeroed out.

According to Ashley Morgan, a bankruptcy and debt attorney in Herndon, Virginia, the first step is to ensure that all of the accounts covered in the Chapter 7 bankruptcy reflect as “zero balance owing” on your credit reports.

“If there’s still money on these accounts,” Morgan explains, “your scores will be significantly worse than they should be.”

AnnualCreditReport.com may provide you with copies of your credit reports from Experian, TransUnion, and Equifax. If you find an inaccurate amount, dispute it with one of the credit reporting agencies (which will notify the others) and provide bankruptcy paperwork that shows the discharge. Your credit scores should improve after your credit reports are updated.

2. Handle confirmed debts with caution.

Morgan believes you’re in a good position if you didn’t include all of your bills in the bankruptcy. You’re ready to put them to work in your favor.

You don’t need to apply for and receive new loans or credit cards since you already have all you need to improve your credit reports. The most significant credit rating component is payment history, so stick to those deadlines. If you still have a credit card, use it only for what you can afford and will be able to pay off in full when the bill arrives.

A Chapter 7 bankruptcy will be on your credit reports for ten years. Still, provide proof of prudent credit utilization to your credit reports. Your credit scores will improve, particularly as the bankruptcy progresses.

3. Make an application for a secured credit card.

What if you don’t have a loan or a credit card? The Debt Relief Company’s CEO, Adam Selita, says it’s no issue.

“The best and most helpful strategy to rebuild your credit after bankruptcy is to apply for a secured credit card,” Selita adds, adding that you can receive one regardless of your bankruptcy status or the accompanying severely poor credit ratings.

Secured credit cards need a cash deposit that is generally equal to the credit limit. So, if you put down $500, your maximum bet will be $500. After a set number of on-time payments, many creditors may release the funds to you, thereby converting the card into an unsecured card. Some even have a rewards program where you can earn money while charging.

The Discover it® Secured Credit Card, for example, gives you 2% cash back at petrol stations and restaurants (up to $1,000 in expenditures every quarter) and 1% cashback on everything else. Your account is also assessed after eight months, and if you’ve used the card correctly, you may upgrade to an unsecured account.

4. Consider an unsecured credit card that is bankruptcy-friendly.

Another alternative is to get an unsecured beginning credit card, such as the Indigo Platinum Mastercard, designed exclusively for those who have filed for bankruptcy. However, the limitations are generally modest. Many people levy an annual fee, and incentive schemes are rare.

Low According Michael Sullivan, a personal financial adviser with Phoenix-based Take Charge America, a nonprofit credit counseling firm m, Low-limit department store or gas company cards, might be even simpler to qualify for than general-purpose accounts.

“A customer with excellent habits may have a credit score of over 600 within a few years after declaring bankruptcy, and it can be a very high score before the 10-year time is complete,” he adds.

Low-limit cards should be used with caution. Because credit usage is the second most significant FICO scoring element, you’ll be penalized if your amount is close to the limit when your scores are computed before you pay the bill.

A weekly grocery bill may push you over the limit with these cards, so charge what you want but remove the balance right away. It will ensure that there is a typical credit use percentage and that payments are made on time.

5. When paying fixed bills, use autopay.

Simplify your credit score restoration strategy, regardless of whatever credit card you have. Decide on a defined monthly expenditure (such as a $49 gym membership), charge it to your card, and then have the payment paid automatically by your bank.

If you’ve had problems keeping out of debt in the past, Selita believes this is a great approach to get back on track. You’ll just need to make sure your checking account has enough cash to pay the charge and keep an eye on your credit card account bills.

Apart from being simple, this technique will guarantee that a regular supply of good information is uploaded to your credit report. You’re establishing that you’re a dependable borrower by consistently charging and repaying. Your credit ratings will climb as a result.

6. Get a credit-building loan

Demonstrate that you can manage a range of credit products to get a perfect score. Here’s when loans come in handy. Consider a credit builder loan instead of an unsecured loan if you don’t think you’ll qualify for one.

You put down a particular amount of money. Then a loan in that amount is provided to you, which is usually offered by credit unions and community banks. You’re essentially borrowing your own money.

It has a repayment plan and set monthly installments, just like any other loan. For example, Sunrise Bank provides 12- to 18-month credit builder loans, and your money will be deposited in a Certificate of Deposit, earning you some income.

Your lender reports your account activity to the credit agencies, and your credit will improve due to your consistent payments. Your deposit will be refunded to you after you have paid, and your credit ratings should improve.

7. Enlist the help of a co-signer.

Do you want to take out a bigger loan? That makes sense if you need to finance a large purchase, such as a vehicle or a new laptop. Another option is to find someone with excellent credit, and a high salary prepared to serve as a co-signer. Loans that last a few years can help you build a more extended credit history.

The loan will show up on both of your credit reports and be included in your credit ratings. Still, you will both be responsible for the obligation. If you don’t pay on time, your co-signer will be held accountable.

Because the co-signer is a low-risk borrower, the lender should be cool with it, but you’ll have to go to great lengths to make sure you pay on time. If you don’t, not only will your credit score suffer, but you may also end up jeopardizing a valuable connection.

8. Become a registered user.

Asking whether you may be an authorized user on their credit card is less dangerous for the other person. You’ll be connected to a particular credit card account if they approve. It will then appear on your credit record and be taken into account when calculating your credit scores.

“For those who have recently filed bankruptcy, piggybacking on someone else’s credit in this manner is a terrific idea,” Selita explains. “Your credit scores will improve if the cardholder pays on time and maintains the debt low.”

All you have to do is check your credit report regularly to ensure that the card is still active. You may thank the owner for the trip and ask to be removed once your credit ratings have improved enough to qualify for your own account.

9. Supplement your credit report with other information.

Adding alternative data to your credit profile, such as utility and cellular payments, is another very straightforward strategy to improve your credit ratings.

With the free Experian Boost program, you may add them to your Experian credit report. There are no qualifying requirements, and all you have to do after that is pay your payments on time.

This service is particularly beneficial for persons with poor credit or thin profiles. According to Experian, consumers with FICO scores of 579 and lower saw the most significant score increases: 86 percent increased their scores, with an average rise of 21 points. Sixty-four percent improved their credit score from “poor” to “fair.”

Finally, some ideas

There’s no reason to be concerned about a poor credit score after bankruptcy. You can make substantial scoring leaps if you put in the time and effort.

“Bankruptcy isn’t called a new start for nothing,” Morgan explains. “Now that you don’t have tens of thousands of dollars dragging you down, you may utilize credit once again – but this time to improve your credit ratings!” 

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