How Do I Rebuild My Credit Score After Bankruptcy?

Bankruptcy will have a significant negative impact on your credit score. It is a fact, so there is no reason to sugar-coat it. It is also a fact that it is possible to rebuild your credit score reasonably quickly, two to four years is very realistic, if you are willing to take the time, have some patience and execute a relatively straightforward series of steps.

Before these steps, please be warned that you will likely receive offers from a number of companies that will claim to be able help you rebuild your credit or even remove the bankruptcy from your credit record, if you only pay them a reasonable fee. Please do not fall for their advertisements. Chapter 7 bankruptcy will stay on your record for ten years. Chapter 13 bankruptcy will stay on your record for seven years. It is extremely rare that a voluntary bankruptcy filing can be removed from your credit. Knowing that, you do not need anyone to help you rebuild your credit. It is not complicated, but it requires patience and discipline.

Here is how you can properly and effectively rebuild your credit:

Shortly after your bankruptcy discharge, pull all three of your credit reports and review them for accuracy. If debts are still showing as due and owing, file a dispute with the credit reporting agency. You can obtain your credit reports either from each of the bureaus directly (Experian, Equifax and Trans Union) or from a single site, such as AnnualCreditReport.com. Directions for filing a dispute are at the end of each of the reports.
Prepare an accurate and complete budget, including savings to build an emergency fund, and then live by it. Your attorney has started this for you in your bankruptcy petition on Schedules I & J. There are multiple free budgeting apps available online. Build a complete and accurate budget and execute on it.
Continue building your emergency fund. When you want to incur credit, you will be asked what assets you hold. Having money in the bank is a significant positive factor for potential lenders.
Start using credit in a responsible manner again. Wait six to twelve months from your discharge date, then obtain a secured credit card or credit rebuild loan. You will need to put up a deposit against this type of credit, but it will reflect more positively on your record and rebuild your credit score faster. Never use more than 30% of your available line of credit and pay the balance off every month.
Prepare and budget for long-term goals. Your emergency fund is for emergencies. If you know you will need to replace your car in two-three years, save for it separately. A sizeable downpayment creates immediate equity in an asset, reducing the risk to the lender and reducing the interest rates they will charge you.
Have patience. It will take at least two years for your credit score to recover, even if you do everything right. There are no legitimate shortcuts.

Rebuilding your credit score after bankruptcy is not quick and it is not easy, but it is very feasible. Bankruptcy gave you a “fresh start” on your credit, it’s up to you what you do with it.

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