How to Repair Credit After Bankruptcy

Guide to Post-Bankruptcy Credit Repair

It’s a widespread myth that filing bankruptcy will ruin your credit forever. While it’s true that bankruptcy does some serious damage to your credit score, with the right steps you can get new credit again. Bankruptcy will stay on your credit report for 10 years and on record with the bankruptcy court forever, but credit won’t be off limits to you for that full amount of time. You can repair your credit after bankruptcy to get your credit score back on track.

Make sure your credit report accurately reflects your bankruptcy.

Man holding empty wallet
Image Source/ Image Source/ Getty images

You may think you don’t want your credit report to show that you’ve filed bankruptcy. But, if your credit report doesn’t show your bankruptcy, it will instead show an outstanding, probably delinquent balance, which will hurt your credit score too. Once an account balance has been discharged through bankruptcy, your credit report should show a $0 balance for that account. If it doesn’t, you can send a dispute to the credit bureaus to have your credit report updated.

Fix other errors on your credit report.

Part of credit repair is making sure your credit report doesn’t contain errors. Review all the accounts on your credit report, even those that weren’t part of your bankruptcy, and dispute errors to have them removed from your credit history. You can also use pay for delete and goodwill letter strategies to remove other negative information from your credit report.

Keep paying non-bankruptcy accounts on time.

Not all of your accounts will be included in bankruptcy, for example, student loans typically can’t be discharged in bankruptcy. Positive payments will help improve your credit score over time, so make sure you keep paying any credit cards or loans that weren’t included in your bankruptcy filing. You should even keep up with payments on accounts that aren’t on your credit report because they can be reported later on if you fall behind on the payments.

Don't waste time or money trying to get bankruptcy removed.

You’ll see advertisements from credit repair companies who say they can remove bankruptcy from your credit report. They can’t legally do this if the bankruptcy is accurate. If you try to dispute a bankruptcy listing, it will just come back as verified. Also, the methods credit repair companies use to remove bankruptcy from your credit report are illegal and sometimes cause more problems in the long run.

Get new credit.

This is one of the biggest hurdles to get over in post-bankruptcy credit repair, but it’s also one of the most critical steps to rebuilding your credit. There are credit cards that approve applicants who have a history of bankruptcy, but if you’re not having luck with any of these traditional credit cards, seek a secured credit card. Secured credit cards require you to make a security deposit, but if you make timely payments for at least a year, the card issuer may convert your card to an unsecured one. Keep in mind that credit will be more expensive after your bankruptcy.

Make your new credit card payments on time.

The two things that will most help your credit score are time and positive credit card payments. Once you get a new credit card – whether it’s secured or unsecured – make your payments on time every month. Even better, pay your balance in full to keep yourself from getting back in debt trouble.

Keep your credit card balances low.

Consumers with the best credit scores keep their credit card balances low. This isn’t about how much of your balance you pay off every month, but about how much you charge in the first place. The credit card issuer could report your credit card balance at any time during the month, so you want to be sure to only charge 30% of your credit limit, less than 10% is even better.

Apply for new credit sparingly.

Part of your credit score is based on how many new credit applications you make. Avoid putting in several new credit card or loan applications at once, especially if you’re getting turned down. The new applications will ultimately make lenders wary of approving you because they think you may be desperate for credit.

Take it slow.

If you get in a rush to rebuild your credit score, you could end up making a mistake that would just delay your credit repair progress. So, take your time getting your credit back on track. Take it one payment at a time. When you get a new credit card, charge what you can afford and pay the balance off every month. It make take several years, but you can achieve an excellent credit score over time.