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How to Rebuild Your Credit After Bankruptcy


How to Rebuild Your Credit After Bankruptcy

Filing for bankruptcy protection from creditors certainly has a long list of benefits. Bankruptcy can stop creditors from suing, it may put a stop to wage garnishments, and it can even grind foreclosure proceedings to a halt -  at least temporarily. However, while bankruptcy has its list of benefits it also has a very significant downside. In the majority of circumstances, filing for bankruptcy is likely to utterly destroy a consumer's credit scores.

While it is completely true that filing bankruptcy is virtually guaranteed to have a severely credit score impact, it is not true that consumers who have filed for bankruptcy cannot begin to rebuild healthy credit again once the bankruptcy has been discharged. Even though the evidence of the bankruptcy filing will remain on a consumer's credit report for 10 years in the majority of cases, consumers can still begin taking steps to improve their credit scores even while the bankruptcy is still present on their credit reports. Here are 3 simple tips which can help your credit to begin recovering after a bankruptcy.

1. Check your credit reports for errors.

In 2013 the Federal Trade Commission estimated that there were around 40 million mistakes present on consumer credit reports. Mistakes on credit reports are not unusual. Consumers who have recently had a bankruptcy discharged are no exception to the rule.

If a consumer has filed bankruptcy then he should check both the public records section of his credit reports to ensure that the bankruptcy itself is being reported properly and he should review each of the individual accounts which were included in his bankruptcy for errors as well. Should a consumer discover credit reporting errors (i.e. a discharged bankruptcy being reported as "filed," duplicate listings of a single bankruptcy, accounts reporting late payments after the bankruptcy was filed, accounts reporting balances after the bankruptcy was discharged, etc.) then it will unfortunately take some work to correct the errors.

A consumer can opt to dispute any errors he discovers on his own or he can also hire a reputable credit repair professional for assistance. Either way, it is extremely unlikely that credit report errors will fix themselves so ignoring the problem is not a solution.

2. Hone your credit management skills.

Many consumers file bankruptcy due to a financial catastrophe caused by an illness, job loss, or even a death. However, there are many other consumers who file for bankruptcy due to financial problems brought about by irresponsible credit management habits. In other words, these consumers spent more money than they earned.

For consumers who find themselves in the 2nd category, here is the first piece of advice I have to offer - shake it off! While that advice may sound a bit cliché, it is still worth following. Living in guilt over past credit mistakes is not going to undo those mistakes. However, obsessing over past mistakes might keep you from moving on and making positive changes in the future.

Consumers looking to hone and strengthen their credit management skills should start by drawing up a written plan for how to handle their finances - aka a budget. CLICK HERE for a free copy of the HOPE4USA Budgeting Worksheet to get started. It can also be helpful for consumers to have an accountability partner who can help to check up on their new commitment to manage money better.

3. Re-establish current credit.

One of the smartest strategies that a consumer can employ to begin recovering from a bankruptcy is to re-establish positive credit card right away, especially in the form of credit card accounts. Of course positive accounts will not completely overshadow the fact that a bankruptcy was filed; however, beginning to show positive credit management habits post bankruptcy can go a long way towards counteracting the impact of the bankruptcy upon the consumer's credit scores.

Many consumers will wonder, "What bank is going to approve me for a credit card with a bankruptcy on my credit reports and bad credit scores?" The answer is a bank which offers secured credit cards. When a consumer opens a secured credit card the issuing bank will require the consumer to make a deposit with the bank equal to the amount of the credit limit on the card. For example, a consumer would make a $300 deposit to receive a secured credit card with a limit of $300. Due to the fact that the account is "secured" with the consumer's own funds these types of credit cards can often be qualified for easily in spite of low credit scores and credit blemishes like discharged bankruptcies. 


Michelle Black is an author and a credit expert with over a decade of experience, the credit blogger at, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.