If you’ve recently filed for bankruptcy, you might still be feeling the sting of losing whatever credit standing you had. Keep your chin up. There is a light at the end of the tunnel and the most important thing you can do right now is make your bankruptcy payments in full and on time, and stay focused on regaining your credit standing.
A bankruptcy can be listed on your credit report for up to 10 years depending on the type, and there is a good chance your credit score will be rather low until your bankruptcy is discharged and you’ve take the necessary steps to rebuild your credit.
For an overview and explanation of your credit standing after bankruptcy, check out your free credit report snapshot. It will give you a completely free look at your credit scores, updated every 14 days, plus help you track which areas of your credit are improving.
Rebuild Your Credit With A Secured Card
A secured card is a good way to go if you’re coming out of a bankruptcy. Keep in mind, though, that until your bankruptcy is discharged, it is still possible to be turned down, even for a secured card.
That doesn’t mean it’s impossible to get a credit card before your bankruptcy is discharged. Keep in mind though that your post-bankruptcy credit card options will be limited and will usually involve annual fees and high annual percentage rates.
How a Secured Card Can Help Your Credit
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.
This article has been updated. It was originally published December 5, 2013.