How To Repair Credit History After Bankruptcy
A bankruptcy filing can feel like hitting rock bottom–it's like pressing a financial reset button. For most people, it’s a tough decision, and the aftermath can leave you wondering if you will ever recover from this setback and succeed in repairing or rebuilding your credit.
A bankruptcy stays on your credit report for several years—up to 10 years for Chapter 7 (liquidation bankruptcy - wipes out most unsecured debts, such as credit card debt and medical bills) and seven years for Chapter 13 (wage earner's plan - involves a structured payment plan).
The good news is that bankruptcy isn’t the end of the road; it's not a life sentence for your credit score—it’s a fresh start.
Yes, your credit score takes a hit, and lenders might be hesitant to work with you; a bankruptcy filing will make it harder to get approved for home/car loans, credit cards, or even rent an apartment.
But, the negative impact of a bankruptcy filing reduces over time. Lenders also look at your recent or current financial behavior. So, you can demonstrate that you’re on a better path.
No, it’s not going to happen overnight, but with consistent effort, you can repair and rebuild your credit and regain financial stability after bankruptcy. With patience and the right strategy, you can bounce back.
Here in this blog post, we will walk you through the steps to repair your credit history after bankruptcy filing.
Step 1: Review Your Credit Report for Accuracy
Immediately after your bankruptcy case is closed, get a copy of your credit report from all three major credit bureaus—Equifax, Experian, and TransUnion. You’re entitled to one free report from each bureau every year at AnnualCreditReport.com.
Why is this important? Because mistakes happen.
So, carefully review your credit reports for any inaccuracies related to the bankruptcy or other accounts. Make sure that:
Accounts discharged in the bankruptcy are reported as "discharged"
Discharged accounts have a $0 balance
The bankruptcy filing date is correct
If you spot any errors or outdated info, dispute those inaccuracies right away. Getting such credit report errors fixed can give your credit score a boost.
You can dispute credit report errors on your own or work with a legitimate credit repair company like AMERICA CREDIT CARE to dispute inaccuracies on your behalf.
Cleaning up your credit report is the first step in rebuilding your credit.
Keep Tabs on Your Credit Score
Keep track of your credit score to see how your credit-rebuilding efforts are paying off. You can track your score monthly, but make sure you're looking at the same type of score each time so you can make meaningful comparisons.
Here's a quick rundown of the FICO® Score ranges:
Exceptional: 800-850
Very Good: 740-799
Good: 670-739
Fair: 580-669
Poor: 300-579
Step 2: Create a Realistic Budget and Stick to It
Bankruptcy often stems from financial hurdles, so it’s important to create a budget that works for your current situation. Start by listing your income and expenses. Be honest with yourself about what you can afford and where you can cut back.
Creating a realistic budget after a bankruptcy isn’t about restricting yourself—it’s about giving you control over your money. When you track your income, expenses, and know where every dollar is going, you’re less likely to fall back into old habits. Plus, sticking to a budget will help you avoid accumulating new debt, which is key to rebuilding your credit.
Step 3: Build an Emergency Fund
Set aside a small amount each month—even $50 or $100 can add up over time.
Yes, even a small savings cushion can make a big difference when unexpected expenses arise.
Having an emergency fund means you won’t have to rely on credit cards or loans when life throws you a curveball. This is a critical step in breaking the cycle of debt.
Step 4: Get a Secured Credit Card
Secured credit cards are designed for people who are rebuilding their credit after bankruptcy filings and other financial setbacks.
Unlike a traditional credit card, a secured card requires a cash deposit (collateral), which serves as your credit limit.
You use the card for small purchases and pay off the balance in full every month. This helps demonstrate that you can manage credit responsibly.
Over time, your positive payment history will help improve your credit score. Just make sure to choose a card that reports to all three credit bureaus. Use the card responsibly (keep the balance low and make on-time payments), and you can mend your credit over time.
Step 5: Consider a Credit-Builder Loan
Credit-builder loan is a good option if you want to establish a positive payment history after a bankruptcy filing. These loans are designed specifically for people looking to improve their credit.
In this case, the lender holds the funds in an interest-earning account, and you'll make monthly payments. Once you've made all your payments, you get the loan proceeds, plus any interest earned.
The key here is to make all your payments on time. This demonstrates to lenders that you’re responsible with credit; a positive payment history will eventually improve your score over time.
Step 6: Become an Authorized User
Ask a trusted friend or family member with good credit to add you as an authorized user on their credit card. Their positive payment history can help improve your credit score; negative behavior, if any, could also hurt your credit.
This approach can potentially give your credit score an immediate positive impact; the full history of the account is added to your credit reports.
If the primary account holder maintains a low credit utilization rate and makes on-time payments, your authorized-user status can continue to help build your credit post bankruptcy.
Keep in mind that the primary cardholder is responsible for paying the balance, and accumulating too much debt can be detrimental. It may not lift a score by nearly as much as other methods and it won’t help as much as someone with a “thin file” with little credit information in it than someone who has a file chock-full of derogatory marks. Also, some credit cards may not report payment activity by authorized users to the credit bureaus.
Step 7: Get a Cosigner
Consider asking a loved one with good credit to cosign a loan or credit card application. If approved, you're responsible for making payments, but the cosigner agrees to step in if you can’t.
A cosigner can improve your chances of getting approved for a loan with favorable terms after bankruptcy. When a cosigner with good credit history agrees to be responsible for a loan if you default, lenders consider both credit histories and income profiles to determine eligibility, interest rates, and other terms.
In this post-bankruptcy credit rebuilding approach, making on-time payments can improve your credit score, but missing payments will negatively affect both you and your cosigner. So, it is important to discuss the implications of cosigning with the individual beforehand, since their credit can be negatively affected if payments are not made on time.
Step 8: Get a Retail Credit Card
You can apply for a gas station or local retail store credit card to create a positive payment history. These credit cards are typically easier to get approved for after bankruptcy.
Step 7: Use Credit Wisely - Keep Your Credit Utilization Low
Be mindful of your credit usage after bankruptcy. Avoid charging things you can't pay off at the end of the month.
If you’re using a secured credit card or any other form of credit, keep your credit utilization low. Credit utilization is the percentage of your available credit that you’re using, and it’s a major factor in how your credit score is calculated.
In other words, keep your credit card balances low compared to your credit limits—less than 30% credit utilization is a good target, but less than 10% is even better. For example, if you have a credit card with a $1,000 limit, try to keep your balance below $300.
Step 8: Limit New Credit Inquiries
While you need to make an effort to establish new credit, be careful about how many applications you submit. Each application can lead to a hard inquiry, which can temporarily hurt your credit score. So, space out your applications for new lines of credit; focus on quality over quantity.
Step 9: Be Patient and Persistent
Rebuilding your credit after bankruptcy is a marathon, not a sprint. It takes time, and there will be moments when progress feels slow. But don’t get discouraged. Every positive step you take—whether it’s paying a bill on time or reducing your credit utilization—adds up and contributes towards improving your credit score even when a bankruptcy still appears in your credit report.
Celebrate the small victories along the way. Maybe your credit score increases by a few points, or you’re approved for a small loan. These milestones are signs that you’re on the right track.
What Not to Do When Rebuilding Credit After Bankruptcy Filing
Payday Loans: Such loans typically come with extremely high interest rates and fees. These loans can trap you in a cycle of debt all over again if you take this route to quickly rebuild your credit. So, it is advisable to avoid them altogether.
Racking Up Debt Again: Be sure to avoid overspending and accumulating new debt. When you are working to repair your credit history after bankruptcy filing, you need to focus on living within your means and saving for the future.
Illegitimate Credit Repair Companies: Be wary of irresponsible credit repair companies that promise to "erase" your bankruptcy or dramatically improve your credit score within a few weeks. As per the Credit Repair Organizations Act, credit repair companies cannot make such promises.
Final Words: You’ve Got This!
Bankruptcy might feel like a major setback, but it’s also an opportunity to start fresh.
Remember, you’re not alone in this journey. Millions of people have walked this path and come out stronger on the other side.
With patience, persistence, and the right strategies, you can too. So take a deep breath, roll up your sleeves, and start taking those small, steady steps toward rebuilding your credit. You’ve got this.
