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From the Experts at

How To Rebuild Your Credit After Bankruptcy

by Lucy Lazarony

How To Rebuild Your Credit After Bankruptcy

A bankruptcy may be listed on your credit report for up to 10 years and there is a good chance your credit score will be rather low until you take the necessary steps to rebuild your credit.

For an overview and explanation of your credit standing after bankruptcy, check out the free Credit Report Card. You’ll also get a free look at your credit scores.

Rebuilding your credit after bankruptcy takes patience, persistence and a steady stream of monthly on-time payments.

A low-limit credit card is a great way to start. But because of the bankruptcy on your credit file, you’ll need to think small when applying for credit cards. After bankruptcy, you may not qualify for a run-of-the-mill consumer credit card. But you do have other post-bankruptcy credit card options.

Rebuild Your Credit With A Secured Card

A secured card is a good way to go if you’re coming out of a bankruptcy.

With a secured card, you make a deposit into a savings account and this deposit then secures a line of credit. The credit limit on a secured card is generally the amount of the deposit, minus any fees.

So if you make a $300 deposit on a secured card with an annual fee of $29, your credit limit would be $271.
To make a secured card helpful for your credit, make small purchases and pay the account on time each and every month. Keep balances low. Using 10%-15% of your credit line each month is ideal.

Make sure to choose a secured card that reports to all three major credit bureaus. You want to be sure all of your on-time payments get reported on all three of your credit reports to maximize your credit rebuilding efforts.

Rebuild Your Credit With A Retail Card

Retail cards and department store cards have more lenient credit requirements and you may be able to qualify for one after bankruptcy, once you have a several months of payments with a secured card under your belt.

Because of the higher credit card interest rates associated with these cards, it’s important that you pay the account in full each month. A couple of small charges a month and the accompanying on-time payments are all you need to reboot your credit and build a positive payment history.

Your payment history accounts for 35% of your credit score, so making small, steady on-time payments is the best way to rebuild your credit after bankruptcy.

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  • tech

    what’s old school about getting laid off due to outsourcing and h1b visa workers?

  • Gerri Detweiler

    Karina – I am not sure I fully understand your comment but it sounds to me like you defaulted on some credit cards five years ago and the total balance is $43,000. Is that correct? What state do you live in? Did you look into bankruptcy at all?

  • scratch

    D, that’s all well and good for daily purchases. I agree with you. But there are times when a credit card is advisable or even necessary. When you travel, a credit card is a Godsend. When you reserve a hotel room or airline flight or rent a car, the merchant merely puts a hold on the full estimated amount on your credit card. With a debit card, they charge the card the full amount and refund you upon return. When you make a purchase, a credit card will extend the warranty. And there are other reasons to carry a credit card. However, paying off monthly saves all but the annual fee to hold one of these and preserves credit as well.

  • Credit Web

    Great post!! It is a very
    effective article and easy to understand the things with your posts. Thanks,
    I appreciate it. Keep it up and all the best.

  • Wil Banchs

    Using cash and paying off and closing credit accounts does nothing to create or increase your score – as a matter of fact after 6 months of no reporting by a credit issuing agency you have NO SCORE – which hurts you… true – I have no bills anymore and I have no cards – but when I went to check my score – I didn’t have one at all and when I asked to see what my last score from reporting was, they said they didn’t maintain that…
    So in a way getting debt free is a catch-22, if you aren’t under someone’s credit thumb you will not have a positive or a negative score- you just won’t have one period…

  • Wil Banchs

    There are statute of limitations per state on debt collections – most commonly they are 3/6 or 4/4 (years)… some states in the mid-north are longer with 10/10 and 8/10… the first number referring to unsecured debt cards and the second number dealing with contract debt. There is an interactive state map here on that shows all the states…

  • RobinHood84

    Having a credit card on file isn’t a bad thing, just learn from past mistakes to build up your credit score. Also, you ever rented a car, or similar service? They require credit or require a large holding sum.

  • Thomas

    There actually is another way to do this: If available, have you rent payments reported. Also, if your furniture place or your other providers have this already, sign up for that. That is a start towards getting your credit score back up towards its pre-bankruptcy levels.

  • B. Lee

    Due to an unexpected medical emergency we are now $60k in debt and maxed out credit cards to pay for the services after insurance paid its portion. We wiped out $7,500 in savings too. Now we are living paycheck to paycheck. We own a home with about $20k in equity and have done every thing right up to this point. We have pretty good jobs with about $6k a month in income after taxes. With the house payment, utilities and car payment, we payout about $3000 per month,but the additional burden of the medical expenses put us at almost $7k per month we are robbing Peter to pay Paul. Is BK 7 the answer, I don’t know. Any guidance would be helpful.

    • Gerri Detweiler

      I’m sorry to hear this – it must be so difficult for your family. Yes, I would recommend you talk with a consumer bankruptcy attorney to find out whether that’s the best option for you. If it’s not, the attorney may be able to make some recommendations in terms of trying to negotiate settlements on these debts. If you need help finding an attorney, you can visit the website of the National Association of Consumer Bankruptcy Attorneys.

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  • Meet Our Expert

    lucy_lazarony GravatarLucy Lazarony is a freelance personal finance writer. Her articles have been featured on Bankrate, MoneyRates, MSN Money, and The National Endowment for Financial Education. Prior to freelancing, she worked as a staff writer for Bankrate for seven years. She earned a bachelor's degree in journalism from the University of Florida and spent a summer as an international intern at Richmond, The American International University in London. She lives in South Florida.
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