After a bankruptcy, the sooner you start adding on-time payments, the sooner your credit score recovers. Once your discharge comes through, check that every discharged debt shows a zero balance on your credit reports. Then open one new account, pay it on time every month, and keep any card balance low.
Before you open that new account, write a budget that covers every bill on the income you have now. Then begin building a starter emergency fund, so the next surprise expense is paid in cash, not with new debt.
The bankruptcy stays on your credit reports for years, but FICO says its impact lessens over time and that the sooner you have accounts in good standing again, the sooner your score rebounds. Each move below corrects your reports, adds new on-time history, or keeps that history clean, so start them the day after your discharge.
Correct your credit reports
1. Check every discharged account on your reports
Your discharge ended your duty to pay every debt it covered, so none of those accounts should still show money owed. Confirm that on each of your three credit reports, one account at a time.
You can pull your credit reports from Equifax, Experian, and TransUnion for free every week at AnnualCreditReport.com, and checking your own report doesn’t affect your score. Make it a weekly habit so a fraudulent account or a costly mistake surfaces within a week instead of sitting there until your next yearly look.
Read more: Check Your Credit Report for Free Every Week - Not Just Once a Year
2. Dispute any discharged debt still showing a balance
A discharged account that still lists a balance makes your debts look bigger to every lender who checks your report. Send a copy of your discharge order with each dispute as proof.
Dispute any error on your credit report, from a late payment you never made to an account you don’t recognize, with each bureau that lists it. It’s free. The bureau must investigate within 30 days, or 45 in some cases, and correct or delete anything the company that reported it can’t verify.
Read more: Dispute a Credit Report Error - The Bureau Usually Has 30 Days to Investigate
Add positive history
3. Open a secured card
FICO calls getting a secured card and paying every bill on time a good practice after a bankruptcy. It’s for anyone who can spare cash for a deposit.
A secured credit card is made for bad or no credit. A refundable deposit backs it and usually sets your limit, and your on-time payments build credit like any card’s. Choose one that reports to all three credit bureaus, charges no annual fee, and spells out how you earn the deposit back.
Read more: Rebuild Credit With a Secured Card - Then Upgrade to a Regular One
4. Take out a small credit-builder loan
If the discharge left you with no other debt, this loan suits you best. In a Consumer Financial Protection Bureau study, participants without existing debt saw scores rise 60 points more than those with debt.
A credit-builder loan is worth its small cost in interest and any fees if you can make every payment on time. The lender locks the money in savings while your payments build a credit history, then releases it after the last one. Pick one whose payments reach all three credit bureaus, and set up autopay.
Read more: A Credit-Builder Loan Builds Credit and Savings at Once - If You Never Pay Late
6. Put your rent on your credit reports
Renters can add history without borrowing anything new, since the payment that gets reported is one you already make every month.
Paying rent on time won’t help your credit score unless someone reports it to the credit bureaus, and most landlords don’t. Ask yours to start, or use a rent-reporting service that covers all three bureaus. Reporting helps most when your credit file is thin, and only with scores that count rent.
Read more: On-Time Rent Does Nothing for Your Credit - Until You Get It Reported
Keep the new history clean
7. Automate every minimum payment
Include any car loan or other debt you agreed to keep through the bankruptcy, not just the new accounts on this list.
A payment 30 days late can knock a strong credit score down 60 points or more, and the mark stays on your report for seven years. Put every card and loan on autopay for at least the minimum, then keep paying the full amount by hand. It’s there for the month you forget.
Read more: One Late Payment Can Stay on Your Credit Report for Seven Years
8. Keep your card balances low
On a secured card with a $300 limit, a $150 balance already uses half of it, so keep everyday charges small.
Credit utilization, the share of your credit card limits you’re using, is one of the biggest factors in your credit score. Keep it under 30% on every card and overall, and aim for under 10%. Because issuers usually report your statement balance, pay your cards down a few days before each statement closes.
Read more: Your Credit Utilization Should Stay Below 30% - Ideally Below 10%
Editorial & Advertiser Disclosure: The editorial content on this page is not provided, commissioned, reviewed, approved, or otherwise endorsed by any advertiser. Opinions expressed here are ours alone, not those of any advertiser. The offers that appear on this site are from companies that compensate us. That compensation may influence which products we cover and where and how they appear on a page – including the order in which they appear – but it does not influence our evaluations, ratings, or opinions. We do not include every company or offer available in the marketplace.
Related:
