10 Ways to Rebuild Your Credit After Bankruptcy

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A bankruptcy can take as much as 240 points off your credit score, depending on your situation. That hit will impact your credit score for awhile, since bankruptcies can stay on your credit report for seven to ten years after filing.

The good news, however, is that you can start to rebuild your credit score immediately following a bankruptcy.

1. Keep Debt Utilization Low 

Credit utilization — the percentage of available credit you’re using–accounts for approximately 30% of your FICO score.

After bankruptcy, aim to keep this ratio under 10% for fastest credit rebuilding. If this isn’t possible, stick to 30% or less. 

You can use multiple strategies for this, including:

• Try to make small purchases that you can pay off completely each month.
• Ideally, don’t make purchases on credit that you can’t pay off within the week.
• Use cash when possible to minimize purchases going on cards. 

2. Make On-Time Payments 

Your payment history influences 35% of your credit score — making it the single most important factor in credit rebuilding. After bankruptcy, every payment needs to be on time, every time.

Even one late payment can significantly set back your credit recovery progress, potentially dropping your score by 50 to100 points.

Tips to Always Make On-Time Payments

• Set up automatic payments or calendar reminders to ensure you never miss a due date
• Make sure you have enough money in the account for the payment to go through. 
• Some credit counselors recommend paying bills a few days before they’re due to avoid any processing delays.

3. Stick to Your Repayment Plan 

If you filed Chapter 13 bankruptcy, you’ll have a court-approved repayment plan that typically lasts 3-5 years. Following this plan precisely is crucial not only for your bankruptcy discharge but also for your credit rehabilitation.

Note that creditors can resume collections if you don’t maintain your repayment schedule — and they likely will. Missing payments could result in your case being dismissed, leaving you in a worse position than when you started.

4. Pay Off Any Balances 

Your bankruptcy may not have discharged all debts. Any debt leftover should be prioritized and paid off as quickly as possible. This may include tax obligations, student loans and new debt acquired after filing. 

Leveraging a debt snowball strategy or debt avalanche strategy can help you systematically eliminate remaining balances. The snowball method targets your smallest debts first for psychological wins and to increase monthly cash flow, while the avalanche method focuses on highest-interest debts first for maximum financial efficiency.

Either approach works, but the key is consistent progress toward becoming debt-free beyond your bankruptcy discharge.

5. Consider Secured Loans 

Secured loans, backed by collateral like a savings account or CD, present lower risks to lenders and can be excellent credit-building tools after bankruptcy.

Credit unions and some private lenders may offer credit-builder loans, where you make payments first, then receive the loan amount afterward. While this may seem counterintuitive and can cost some interest, these products are specifically designed to help establish a positive payment history.

6. Become an Authorized User 

Being added as an authorized user on a family member’s credit card can give your score a significant boost, provided they maintain low balances and perfect payment history. 

Their account history can be reflected on your credit report, even though you’re not legally responsible for the debt. Choose someone with excellent credit habits who has held the account for several years. 

7. Don’t Apply For Too Many Accounts at Once 

Multiple credit applications can trigger hard inquiries, and having multiple on your score at once can temporarily lower your score and signal financial desperation to lenders.

Space out credit applications by at least six months, focusing on products specifically designed for credit rebuilding. Research pre-qualification options that use soft inquiries to check your approval odds before formally applying.

Remember that rebuilding credit is a marathon, not a sprint. Patience and strategic application timing will yield better results than desperately applying for every credit offer you receive.

8. Create a New Budget 

A detailed post-bankruptcy budget is your roadmap to financial recovery. Track all income earned and every dollar spent to ensure you’re living within your means and avoiding the debt patterns that led to bankruptcy.

Some financial experts recommend the 50/30/20 approach. This involves allocating 50% of income to needs, 30% to wants, and 20% to savings and debt repayment. However, those rebuilding after bankruptcy might benefit from a more conservative 70/10/20 ratio until financial stability returns.

9. Keep Old Accounts Open After Bankruptcy 

If you have any credit accounts that survived your bankruptcy or were reaffirmed during the process, keep them open and active with small, manageable purchases.

Length of credit history accounts for approximately 15% of your FICO score. Even if you rarely use these accounts, their age helps demonstrate longer-term credit relationships to potential lenders.

10. Be Patient And Consistent 

Create a credit rebuilding plan with realistic timelines and celebrate small victories along the way. Even a 20-point increase represents progress in the right direction.

The consistent application of good financial habits will eventually yield results, even if the pace seems frustratingly slow at first.

The Bottom Line 

Rebuilding your credit after bankruptcy can feel like an uphill battle, but it is not an impossible one. While you can’t erase the bankruptcy itself from your credit score until it falls off on its own, you can take significant strides in rebuilding your credit score with responsible debt and credit utilization. 

Looking for more information on improving your credit score? Learn about rebuilding your credit to get started.

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