Rebuilding Credit After Bankruptcy

Most people shy away from filing a chapter 7 bankruptcy because they fear the negative impact on their credit. A bankruptcy filing will remain on your credit report for 10 years. This, however, should not prevent you from obtaining credit and rebuilding your financial health. Most debtors that have unsecured debt will have a postive effect on their credit score post-bankruptcy. The postive impact results from having a “clean slate” and from the fact that creditors are aware of the 8 year ban on you refiling a bankruptcy. This will make you more creditworthy.

Use Credit to Rebuild Credit

The most common error that debtors makes after filing for bankruptcy is staying away from credit. We meet a lot of clients that tell us “credit got us into this mess, and we are going to stay away from it for a long time”. The key to rebuilding credit is to obtain and use credit. You must show creditors that you are creditworthy and capable of repaying your debts. You may initially pay higher rates, but this will help you in the long run.

Clean Up Your Credit Report

Post-bankruptcy, you must clean up your credit report. Obtain a copy of your credit report after receiving your chapter 7 bankruptcy discharge and make sure that all debts included in the chapter 7 bankruptcy are properly listed. If the accounts show open and overdue, contact the credit bureaus and insist that they change it immediately.

Installment Loans

These type of loans will help you rebuild your credit quickly. These include car loans, student loans and mortgages. You may want to obtain a car loan from a sub-prime lender and make sure that all the payments are made on time. Make sure the lender reports the timely payments to the credit bureaus. Generally, student loans cannot be discharged in a chapter 7 bankruptcy. Continue to make your payments on time and try to pay an amount larger than what you owe. Similarly, paying your mortgage on time will help you rebuild your credit.


This type of credit mainly includes credit cards. You will be offered credit cards after your bankruptcy is complete. We suggest that you open one or two and make sure that all payments are made on time. Do not use the entire amount of the available credit. Light usage of the credit cards will help build your credit score. There are also secured credit cards which will provide you credit up to the amount that you deposit at the issuing bank. These credit cards will help build your credit.

It is important to note that any negative effect on your credit due to a bankruptcy filing will not last forever. You must take the necessary steps to ensure that you rebuild your credit.

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