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7 Ways to rebuild credit after bankruptcy

You can rebuild your credit after bankruptcy. Learn more here.

Anna Baluch
November 22, 2023

Explore the series: Understanding bankruptcy

In this in-depth blog series, learn what to expect after filing for bankruptcy, frequently asked questions, and alternative solutions to consider before filing.

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If you’re overwhelmed with debt, bankruptcy can give you a fresh start. However, it will also take a significant toll on your credit for up to 10 years. Fortunately, there are ways you can rebuild your credit after bankruptcy and set yourself up for a financially secure future. Let’s dive deeper into how to build credit after bankruptcy.

1. Check your credit reports

First, you should become familiar with your credit reports, which show how you’ve managed your credit over time. You can go to to pull free copies of your credit reports from Equifax, Experian, and Transunion, the three major credit bureaus, once a year.

Take a close look at each credit report to determine whether they’re are any inaccuracies that may be bringing down your credit score. Make sure that every account that was discharged in bankruptcy is marked “discharged” and has a $0 balance.

Also, confirm that your filing date is correct so that your bankruptcy won’t remain on your reports for longer than it needs to. (You can expect it to stay there for up to 10 years if you filed for Chapter 7 and up to seven years if you pursued Chapter 13).  If you come across any errors, dispute them right away with the appropriate credit bureau online or via mail.

2. Regularly monitor your credit score

Your FICO credit score is made up of five factors, including payment history (35%), amounts owed (30%), length of credit history (15%), credit mix (10%), and new credit (10%). If you’ve gone through bankruptcy, your payment history is likely in the worst shape, so that’s what you’ll need to focus on improving. You can do this by making on-time payments, which we’ll discuss in greater detail below.

After bankruptcy, you can expect your credit score to drop by 100 or 200 points initially. The good news is your score may get better over time. By checking it on a regular basis, you can determine whether your efforts to improve your credit score are paying off and give yourself the motivation you might need to continue.

You may also look for red flags that might be a sign of fraudulent loan applications, inaccurate account status, or judgments that don’t pertain to you. Credit bureaus, banks, credit unions, credit counselors, and online monitoring tools can all help you keep tabs on your credit score. Be sure to pick one credit monitoring strategy and stick to it so that you’re comparing apples to apples.

3. Apply for a secured credit card

Since it can be difficult to get approved for a traditional credit card after bankruptcy, a secured credit card may be a good option. With a secured card, you’ll make an upfront deposit to protect the lender in the event you can’t make your payments. The lender will then give you a credit limit that’s usually equal to the deposit. As with a traditional credit card, you can use the secured card to make day-to-day purchases, up to your set credit limit.

As you shop around for a secured credit card, make sure you only consider options that report on-time payments to the credit bureaus as this is what will improve your credit score after bankruptcy. Ideally, the card you choose will allow you to convert to a traditional, unsecured card so you can get your deposit back and continue to build your credit. Also, prioritize secured cards with reasonable interest rates and fees to keep your costs as low as possible. Once you decide on a card, be sure to pay off your balances on time and in full. Otherwise, you’ll harm your credit, instead of helping it.


4. Consider a credit-builder loan

A credit-builder loan works like a traditional loan, but in reverse. Instead of providing you with the money upfront, the lender will store the loan proceeds in a dedicated savings account. You’ll receive the cash at the end of the loan term, after you’ve made all your monthly loan payments plus interest.

As long as you’ve made timely payments, a credit-builder loan will improve your credit. A credit-builder loan is usually a small loan, running from $500 to $5,000 and available through community banks, credit unions, and online lenders. Be sure to shop around to find the right loan for your unique needs and preferences.

5. Get a co-signer

A co-signer can be a smart way to finance an expensive purchase after bankruptcy. Your co-signer should be someone you trust with a good credit score and stable income. Once they co-sign a loan for you, it will appear on both of your credit reports. If you can’t make your loan payments and default, your co-signer will be liable for them. For this reason, don’t go this route unless you’re confident you can pay back the loan according to its repayment schedule. If you fail to make payments on the loan you may tarnish your relationship with your co-signer and cause both of your credit scores to suffer.

6. Become an authorized user

If you become an authorized user, a family member or close friend will add you to their credit card account. Your credit score will then benefit from their on-time payments and positive account history.

Rest assured your shaky credit won’t impact their credit. While you can use the credit card to make purchases, you won’t be legally responsible for paying it off. Also, keep in mind that if the primary account holder misses payments for any reason or makes them late, your credit will suffer in addition to theirs.

7. Practice good financial health habits

There are a number of ways you can prove you’re responsible with money and improve your credit post-bankruptcy, including:

  • Make on-time payments: Since payment history accounts for a significant amount of your credit score calculation, pay all your loans, credit cards, and bills on time, every time. Even one missed or late payment can cause your credit score to take a hit. You can set up payment reminders on your phone or enroll in autopayments to make this a bit easier.
  • Keep your credit utilization low: Your credit utilization ratio refers to the amount of credit you’re using divided by the total credit amount of credit available to you. If possible, keep your credit utilization to less than 30%. A lower ratio means you’re using a smaller percentage of your available credit and can in turn, help your score.
  • Limit credit applications: It may be tempting to apply for new credit every time you need to make a large purchase. However, if you fill out too many credit applications, which involve a hard credit inquiry, your credit score will go down. That’s why you shouldn’t apply for new credit accounts unless you absolutely need to.
  • Create a budget and build an emergency fund: A budget can help you take control of your spending. It’s essentially a spending plan based on your income and expenses. There are a number of budgets you might want to consider, including the pay-yourself-first budget, 50/30/20 budget, and zero-sum budget.
  • Build an emergency fund: In addition to a budget, it’s a good idea to build an emergency fund with three to six months' worth of expenses in a high-yield savings account. You can use the money to cover your expenses in the event of an emergency, like a job loss, car repair, or unexpected medical bill. Both a budget and emergency fund may help you avoid debt, which can have a negative effect on your credit.
  • Increase your income: If you don’t earn enough money to cover your needs and some of your wants, it may be worthwhile to pick up a part-time job or a side hustle, like delivering food or driving for a ride-share company. You can also sell items you don’t want or use. With more income at your disposal, you’ll find it easier to repay debt and keep your finances in check.
  • Live within or below your means: When you live within or below your means, you’re less likely to get into debt. You can reduce your expenses by moving to a cheaper home or lower cost of living area, cutting unnecessary subscriptions or memberships, eating at home instead of dining out, and using coupons for everyday purchases. Also, as you pay off debt and increase your income, be mindful of lifestyle creep, which can tempt you to overspend.


How long does it take to rebuild my credit after Chapter 7 Bankruptcy?

A Chapter 7 bankruptcy will stay on your credit report for up to 10 years. Fortunately, the impact of bankruptcy on your credit score will diminish over time. You can begin to see improvements in your score as soon as one to two years after your case has been discharged.

How long does it take to rebuild my credit after Chapter 13 Bankruptcy?

A Chapter 13 bankruptcy will stay on your credit report for up to seven years. It will likely take anywhere between 12 to 18 months for you to start seeing improvements in your credit after your discharge date.

How long is a bankruptcy on my credit report?

While a Chapter 7 bankruptcy may stay on your credit for up to 10 years from the date you filed, a Chapter 13 bankruptcy usually remains for seven years from your filing date.

Can I apply for a loan after my bankruptcy?

Yes, you can apply for a loan once you complete the bankruptcy process. However, you’ll likely have to settle for a high interest rate and high fees. If you need cash assistance after bankruptcy, you might want to consider alternative options like home equity loans, home equity lines of credit (HELOCs), and Home Equity Investments (HEIs). Note that you’ll have to wait a certain period of time before you’re eligible for any of these products.


Final thoughts

After you go through bankruptcy, it will take time to rebuild your credit. As long as you’re patient and persistent, however, your credit will slowly but surely improve. Best of luck in getting your credit back in shape!

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