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3 tips for rebuilding your credit after bankruptcy

On Behalf of | Apr 30, 2024 | Bankruptcy

Filing for bankruptcy can make you feel like you’ve hit rock bottom, especially when you hear how long a bankruptcy remains on your credit record – but don’t let your emotions take over.

Here’s the reality: If you filed bankruptcy because you were overextended on your credit and unable to pay your bills, your credit was already damaged. Bankruptcy is a responsible way to deal with your debt, and it gives you a new starting point to rebuild. You just have to take the right steps. These include:

1. Create a budget that you can handle

It may have been a while since you’ve had enough financial clarity to really make a budget. Be realistic about your income, your expenses and your priorities, and adjust your budget accordingly – then stick with it.

2. Start rebuilding with credit cards

There is a whole industry that provides credit to people who have recently been through bankruptcies. You will likely receive several offers for credit cards shortly after your bankruptcy is discharged that you can use to rebuild. If you don’t, you can turn to secured cards, which require a cash deposit equal to your credit limit as collateral. 

Use any of these cards regularly (but sparingly). By keeping the balances low and making regular monthly payments on time, you will slowly start to raise your credit score and qualify for better cards with higher limits.

3. Consider a “credit-builder” loan

These work similar to secured credit cards, in that you pay off the interest and principal of the loan each month before you actually get the money. The advantage here is that the payments get reported to the credit bureaus each month, helping you show that you’re responsible.

You don’t need to invest more money into fancy (and expensive) credit repair programs. You just need patience, a few good moves with your finances and some time. What’s most important to remember is that bankruptcy is actually a good foundation on which to rebuild, not a disaster.