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Rebuilding Credit After Bankruptcy

Your bankruptcy papers have been filed.  You’ve survived the anxiety and uncertainty of a process that you had no knowledge about months ago. You are excited to start fresh and have that clean financial slate that bankruptcy has given you. Now it is time to start rebuilding your credit and stabilizing your finances.  How can this be accomplished? Is the filing of a bankruptcy the end of the world financially? Rest assured, it isn’t. To give you an idea of what awaits you, let’s take a gander at the steps you can take to create a healthy financial future.


  • Open a new bank checking or savings account-  Opening a new checking or savings account will demonstrate financial stability. It can also give you a fresh slate to practice good financial habits. When you open your account, talk to the banker about signing up for automatic online bill pay. This will ensure that your bills are paid on time, which is a major factor in good credit.


  • Get a secured credit card – A secured card functions essentially like a debit card in that you deposit a certain amount of money into an account maintained at the credit card issuer. This deposit secures the advances made on the credit card they issue to you. You fail to make the requisite payment, you can forfeit the money you have placed into that account. This is one of the easiest ways to build credit and improve your credit score. Be sure to ask if your transactions will be reported to all three major credit bureaus. This will show that you are paying off your debts so your score can begin to improve. Discuss with your bankers when you will be able to use an unsecured credit card.


  • Take out a passbook savings loan or other collateralized obligation –   A passbook saving loan works much the same was as the secured credit card. Here you deposit money into a savings account and the financial institution grants you a loan in that amount. I recommend paying it back in full immediately, demonstrating financial stability and credit worthiness. Again, you fail to make the requisite payment, you can forfeit the money you have placed on deposit.


  • Attempt to develop a relationship with a small independent bank-  In rebuilding your credit, it can if possible be helpful to develop a relationship with a small independent financial institution. An institution that can look at you as more than a FICO score. Of course, in this day and age, this is easier said then done. Credit unions and small town banks may be good starting places. You are looking for a banker who understands what you just went through.


  • Accept solicitations for new credit cards- You may find it surprising, but there are a number of credit card issuers who seek out post-discharge debtors for a chance at new credit. Regardless of how you feel about credit cards, they are a necessity in this country. If you decide to take the kids to Disney World, I’m sure you would prefer to rent a car with a credit card rather than $2,000.00 in cash. Accept these solicitations as part of your quest to develop new credit.


  • The Benefit of ongoing and continuing financial obligation such as mortgages and/or car loans-  You may come out of your bankruptcy with an ongoing monthly mortgage payment or car loan payment. Going forward, you’re continued payment of these obligations will be further evidence of financial stability and credit worthiness.


  • Using credit repair businesses-  Credit repair agencies in some fashion enhance a consumer’s credit score. More then that, I cannot say. Clients have utilized their services with success. I do not, however, have an opinion on them.


  • Get a gas card – Gas cards typically don’t require applicants to have good credit and, in fact, cater to folks with blemished credit. A gas card is a great place to start rebuilding credit.  Gas is a necessary item that you would probably buy any way and not be tempted to splurge on. Pay off your balance every month to reestablish your credit and show creditors that you are not a risk.


  • Know your credit score and monitor it. A free report is available once a year.  Read it carefully and report any discrepancies immediately. The three major bureaus are:

Equifax: 800-685-1111

Experian: 888-397-3742

TransUnion: 800-888-4213.


A bankruptcy can impact your credit score for years to come.  Follow these steps to bounce back faster and in a better financial place.  Be patient through this process and you will see your credit score begin to rise.