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Tips for rebuilding credit after bankruptcy

One stumbling block that keeps some people from filing for bankruptcy is the belief that it will doom their credit for years. However, it is possible to begin rebuilding your credit promptly, and in just a few months, your credit score may start to rise.

In a Chapter 7 bankruptcy, debts such as credit card bills are liquidated. In Chapter 13, many of your debts are reorganized and reduced. The steps to rebuilding your credit score can be the same regardless of which route you chose.

Pay on time

An important step is to pay whatever debts you have on time. In many cases, lenders or creditors report timely payments to the credit bureaus, so this can have a big impact on your credit score.

Get a secured card that reports to the credit bureaus

You may not be able to get a regular credit card, but you can get a secured card. You put down a cash deposit of, say, $500, that you get back within a period such as a year, assuming you make timely payments each month. However, not all secured cards report your payments to the credit bureaus, so be sure you pick one that does.

Also, be aware that it is possible to receive a rejection for a secured card. You enhance your odds of an acceptance if you apply with a credit union or community bank.

Switch to a traditional credit card

After a year or pre-established period of good payments on your secured card, your bank or credit union should be willing to switch it to a regular credit card (ask about that before you apply for the secured card). Keep your card usage relatively low so that your debt-to-credit ratio remains less than 30 percent. Ideally, it would be less than 10 percent.

Focus on saving

Another big step in improving your credit score is to focus on saving. Suppose you would like to take a vacation next year. Instead of charging it to your credit card and paying for it in increments later, you could try putting aside money every month so you are able to pay for it in full. This keeps your debt-to-credit ratio low and ensures that you do not accidentally become trapped in a cycle of high credit card bills.

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McBride Law Firm

McBride Law Firm
301 Jackson Street Suite 101
Alexandria, LA 71301

Phone: 318-625-0471
Fax: 318-445-8066
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