Re-establishing Credit After Bankruptcy

Question: About 6 months ago I was discharged from a bankruptcy and haven’t done anything yet to re-establish my credit. I’ve also moved (renting as usual) and changed jobs (different industry) in the last month, so I have no job or residence stability. My bank won’t offer me any sort of credit for another 5 and a half years when the bankruptcy falls off my credit report.

Short of high-risk (and high-interest) car loans and mortgages, is there anything else I can do to re-establish credit? I’m even afraid to obtain a credit report.

I’ve heard about secured credit cards to repair credit and have seen some mentioned on your website. I’ve heard conflicting opinions on whether or not to get a higher limit. Any ideas on what I can do to re-establish credit soon would be greatly appreciated.

Repairing Credit After Bankruptcy

While it may seem like it now, your credit will not be ruined forever by your bankruptcy.  However it does take time to re-establish good credit after bankruptcy.  The good news is now that your overwhelming debts have been eliminated, you are in a better positions to improve your credit score.

  1. The most important method for re-establishing credit after bankruptcy is to save money.  That money can then be used as a down payment for a car, house, or other purchase.
  2. As for your credit report,  it is true that if you apply for credit at a lot of places in a short period of time, you will lower your credit score.  However, requesting a copy of your own credit report does not impact on your credit score. We recommend you obtain a copy of your credit report and review it for any errors.  Although you will not be able to remove the notice about your bankruptcy, you should make sure all other information on your credit report is accurate.
  3. A secured credit card is also generally a good idea.  We suggest you use it, but pay it in full every month.  It shows that you are handling credit wisely, but still have no debt.
  4. Make sure the pay all your other bills on time and in full.  Failure to pay your other bills like your phone bill, cable bill etc. will harm your credit rating again.
  5. Get new credit.  Over time you will be able to apply for new credit. Ask to increase your limit on your secured visa card once or twice first.  Then after a period of time, try applying for a low limit unsecured credit card.  Something that we do not recommend is payday style loans to repair your credit.  Even if they record your payments on your credit report this is very expensive borrowing and could likely get you into debt trouble all over again.
  6. Keep your credit limits low and apply only for what you need.  You are correct when you say that you should not go for high credit limit on your new credit. If your credit report shows a multiple of new credit applications it may make creditors afraid to take a risk.  High credit limits and multiple cards is also probably what caused your financial problems in the first place.

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