Filing for bankruptcy can be a major setback for your credit score. This can make it difficult to get competitive rates on loans and credit cards for some time. However, it is possible to rebuild your credit score. Here are some steps you can take to get your credit score back on track.
After Bankruptcy, How To Rebuild Your Credit

When you are trying to rebuild your credit after bankruptcy, there are a few things you should keep in mind. Here are some general tips to help you improve your credit score:
- 1. Do not try to borrow money too quickly.
- 2. Focus on making on-time payments.
- 3. Build an emergency fund.
- 4. Stick to a budget.
- 5. Keep a close eye on your credit reports and scores.
Many other strategies can help you rebuild your credit.
Pay Off Existing Loans And Credit Cards On Time
There are a few things you can do to help improve your credit score. One is to focus on making timely payments on existing loans or credit cards every month. Payment history makes up 35 percent of your FICO score, so by making on-time payments, you’re already helping to improve your credit. Another way to help improve your credit score is by using different words. The words you use can show that you’re financially responsible and help improve your creditworthiness.
Making on-time payments is critical to rebuilding your credit after bankruptcy. Establishing a good payment history will show future lenders that you are creditworthy.
There are a few things you can do to make sure you always pay on time. First, sign up for autopayments. This will ensure that your payment is made automatically each month. At the very least, make the minimum payment each month. But ideally, you should make extra payments when possible.
You can also set up reminders so you don’t forget to make a payment. Some credit cards offer the option to send a reminder to your phone or email before the due date. Additionally, it’s helpful to monitor your spending in general. You can set alerts that notify you whenever you use your credit card to pay for something online, over the phone, or through email.
Get A New Credit Line
One way to help improve your credit score is by demonstrating responsible payment behavior with a new line of credit. By making on-time payments, you can show potential lenders that you’re trustworthy and worth lending to. However, each time you apply for a new line of credit, the lender will do a hard pull on your credit report. This can lower your credit score over time.
“Every time you apply for new credit, your prospective lender accesses your credit report,” says April Parks-Lewis, director of education and corporate communications at Consolidated Credit. “Those inquiries can drag down your credit score.” To avoid this, try applying for only the lines of credit that you know you’ll qualify for. You can also get prequalified first, which will result in a soft pull rather than a hard one. When trying to rebuild your credit after bankruptcy, here are some types of credit to consider:
- Credit builder loans. A credit builder loan helps you build your credit score. You deposit money into an account and make payments on the loan, which are reported to the credit bureaus. Once you’ve repaid the loan, the money is released to you. These loans are typically offered by regional banks and community banks, and the loan amounts are usually small.
- Secured credit cards. With secured credit cards, you’ll need to put down some money upfront in the form of a security deposit. The deposit is usually the same as your credit limit, which can start from $200 and go up to $2,500. By making timely payments and demonstrating financial responsibility, you will get your deposit back over time. Because secured credit cards are seen as low-risk, they are ideal for rebuilding credit.
- Being an authorized user on a credit card. As an authorized user on someone else’s credit card, you’re able to use the card for your expenses. While the primary account holder is responsible for making payments, being an authorized user can help build your credit. On the other hand, missing or late payments by the primary account holder can negatively affect your credit file.
Why this matters: Credit lines can help you improve your creditworthiness.
How to get started: No matter what your current financial situation is, it’s important to keep your lines of credit in good condition. This will help you maintain a good credit score and be able to access credit when you need it.
Get A Cosigner For Your Loan
When you apply for a loan on your own, some lenders might see you as a higher risk because of your credit history. Having a co-signer on the loan can help increase your chances of getting approved. The reason is that lenders will look at the co-signer’s credit score when making their decision, which would improve your creditworthiness. Keep in mind that when someone cosigns a loan, they are not receiving any of the money. They are only responsible for repayment if you are unable to make payments.
Why this matters: There are many things you can do to improve your credit score after bankruptcy. One of the best ways to improve your credit is to get a secured credit card. This type of credit card requires a deposit, which acts as collateral for the card issuer.
How to get started: There are many different ways to establish a new line of credit. Some may require a hard pull on your credit, while others may only require a soft pull. Consider what you would use the line of credit for and set limits accordingly. Having a repayment plan in place will help you avoid falling into a deeper debt hole.
Avoid Job Hopping
While most people think that a good job history is key to getting approved for a loan, lenders look more favorably at borrowers with consistent income. This is because stable employment makes it more likely that you will be able to repay your loan.
However, having gaps in your income can make you seem like a riskier investment to lenders. So even though switching jobs might not be ideal, it’s still better than having no income at all.
Why this matters: You’re trying to land financing after bankruptcy, but your credit is shaky. To make yourself look more favorable to lenders, you need to have stable finances. This means having a consistent income and not changing jobs too much.
How to get started: Before you decide on a lender, find out whether or not they consider employment history in their decision-making process. This is especially important to keep in mind if you are self-employed or have a side hustle, as you may need to provide additional documentation to verify your income. The more documentation you can provide that shows your income is consistent, the better.
Monitor Your Credit Reports And Scores Closely

It’s important to stay on top of your credit score and report. You are entitled to one free copy of your credit report from each of the three major credit-reporting institutions: Equifax, Experian, and TransUnion. Be sure to take advantage of this opportunity and examine your reports for errors or missing information. Any inaccuracies you find, such as a delinquent account that doesn’t belong to you, can be reported to the appropriate agency. Once the negative mark is removed, your credit score is likely to improve.
Why this matters: Your credit report is one of the most important factors in determining your credit score.
How to get started: You can access your credit reports for free by visiting AnnualCreditReport.com. You can get one report from each of the three credit bureaus every week, and this service is available through April 2021. In addition, many credit card companies offer regular updates on your credit score.
You Should Think Twice Before Working With Credit Repair Agencies
There are plenty of options out there for those struggling with their credit. However, one of the best things you can do is focus on increasing your emergency fund and savings. This will help you change the habits and circumstances that led to bankruptcy in the first place.
“There are many agencies out there that will claim they can remove a bankruptcy or fix a credit report,” says Samah Haggag, a senior marketing manager for Experian. “However, there is nothing a credit repair organization can do that you cannot do yourself with time and effort.
Why this matters: There are many benefits to using a professional service to help improve your credit score. However, these agencies can charge fees for their services. Instead of using one of these agencies, you can save money by checking your credit reports and disputing any errors that you find.
How to get started: Before considering using a credit repair agency, have a look at your budget and request copies of your credit report. This will give you a better idea of where you stand financially and what options may be available to you.
Getting Your Finances Back On Track After Bankruptcy

Invest In An Emergency Fund
Now that you’re free from the burden of debt, it’s time to start saving up. By setting aside a portion of your income and cutting back on non-essential expenses, you can avoid taking out loans and getting into debt again. This is the perfect opportunity to start building up your savings so that you can secure your financial future.
Why this matters: Having an emergency reserve can help you avoid falling into the same debt traps that caused your bankruptcy. By setting aside money each month, you can build up a buffer that will give you the financial flexibility to handle unexpected expenses.
How to get started: Once your debt payments have been discharged through bankruptcy, it is important to set up a new budget based on your income and remaining expenses. This budget should include saving up an emergency fund in case of unforeseen circumstances.
Keeping A Budget Is Important
It is highly likely that you dug yourself into a deep debt hole and found yourself in dire financial circumstances partially because you were not effectively managing your money. By closely monitoring your spending habits, you can ensure that you stay within your budget and do not overspend. When you overspend, it is easy to rack up more debt than you can reasonably handle.
Why this matters: It is often said that financial well-being is 90% about money management and only 10% about income and other factors. This may be true to some extent, but it is still important to consider all aspects of your finances.
How to get started: There are many different money management apps available that can help you keep track of your spending and saving. Checking your bank balance regularly and budgeting monthly can also help you stay on top of your finances and make necessary adjustments.
Don’t Let Your Credit Habits Get Out Of Control
When trying to rebuild your credit, it is important to remember the things that caused your credit score to drop in the first place. By taking steps to avoid those mistakes, you can help improve your credit score. For example, one common reason for low credit scores is having too high of a debt-to-income ratio. To help improve your score, make sure to keep your DTI low.
Additionally, try to keep your credit usage below 30%. Another factor that affects your credit score is your payment history – which makes up 35% of the score. So, it is important to stay on top of all of your payments and avoid missing any. Finally, something else that can negatively impact your credit score is racking up large amounts of debt on your credit cards – especially during the holidays.
Why this matters: Having good credit habits is important for maintaining a high credit score. This is especially true when you’re trying to rebuild your credit after bankruptcy. It’s crucial to show lenders that you’re financially responsible.
How to get started: Making on-time payments and monitoring your financial habits are key to rebuilding your credit. A free credit monitoring service can help you track your progress and plan your next steps.
What Are Your Chances Of Getting Credit After Bankruptcy?

While it may be more difficult to find a lender offering a competitive product, there are still ways to obtain credit following bankruptcy. Some types of credit that may be available include:
- Car financing. Chern states that an individual who has filed for Chapter 7 bankruptcy can finance a car the following day. Additionally, “a debtor who is in a Chapter 13 repayment plan may be able to finance a car while the plan is still in effect, although permission from the trustee is required after showing that the car is necessary to complete the debt repayment.”
- Conventional mortgage. It will usually take 18 to 24 months for someone who has gone through bankruptcy and re-established good credit to get a mortgage loan. Borrowers with impaired credit should expect to pay interest rates that are two to three percentage points higher than conventional rates.
- FHA-insured mortgage. After a debtor has filed for bankruptcy under either Chapter 7 or 13, they may be eligible for an FHA-insured mortgage. To qualify, the debtor must have made timely payments for at least one year and have received permission from the court.
Final Thoughts
Filing bankruptcy can provide a fresh start for your finances when you’re struggling to keep up with debt payments. However, your credit score will be impacted by bankruptcy.
There are steps you can take to rebuild your credit. Making on-time payments on existing loans and credit cards is one way to get started. You can also improve your credit score by monitoring your credit report and disputing any errors you find.
Frequently Asked Questions
What Is The Timeframe For Rebuilding Credit After Chapter 7 Bankruptcy?
When you file for bankruptcy, it will stay on your credit report for 10 years. However, with Chapter 7 liquidation bankruptcy, you can immediately and drastically reduce your debt-to-income ratio, which could improve your credit score in the future. Keep in mind that you will not be able to qualify for Chapter 7 again for 8 years, so you may look like less of a risk to potential lenders in the meantime.
After Chapter 13, How Long Does It Take To Rebuild Your Credit?
After filing for Chapter 13 bankruptcy, debtors will usually see a reduction in their debt-to-income ratio. However, this won’t happen immediately – it may take three to five years of living on a strict budget before debtors can manage their money more efficiently. In many cases, after making regular Chapter 13 payments for 18 months, debtors can refinance and exit the bankruptcy process, especially if they have equity in a home.