After Bankruptcy: Top 5 Ways To Rebuild Credit

After bankruptcy you find yourself debt-free. You don’t ever expect to get into debt again, but you know that you want to rebuild your credit after bankruptcy.

Surprisingly enough, it’s not that difficult to do it, if you know the steps to take. Following these 5 easy steps will help your rebuild your credit post-bankruptcy as quickly as possible:

1. Repay your remaining debts on time: If you have any student loans, mortgages or car loans that survived bankruptcy, take pains to pay them on time after your case is completed. This positive payment stream will reflect positively on your credit report after bankruptcy.
2. Open up a low-limit credit card account with a secondary issuer: Companies such as Capital One will gladly allow you to open up a credit card account with a very low credit limit ($300 or so). Open the account, charge it up to about 70% of the limit, and pay it off over a 3-month period of time. If you do, the high balance as well as the payments will reflect positively on your post-bankruptcy credit report.
3. Pay your rent and utility bills on time: Your landlord and the utility companies are all creditors. Paying them on time will help in the event that a potential creditor contacts them for credit references.
4. Build your savings: It’s easier to borrow money when you don’t need it, the old saying goes.  Mortgage lenders in particular will look at your bank account balances when deciding whether to give you a new loan, and it’s far simpler to convince a bank to take a chance on you when you show that you’ve got cash on hand.
5. Get a secured credit card: Many banks will be happy to give you a credit card if you agree to deposit money with the bank to be held as security.  These banks will usually report the payment activity on your credit report.  This is good because you establish new credit post-bankruptcy without actually owing any money – and you often earn interest on the security deposit.

Remember, there is no good thing as “good debt,” contrary to what the self-proclaimed financial gurus tell you.  If you can put money into the bank each pay period you’ll quickly amass enough to buy that new car and take that long-awaited vacation – without paying for it over and over for years to come.

Have you gone through bankruptcy and found another way to re-build your credit?  Do you have other ideas beyond what I’ve outlined here?  If so, add your comment below!

Photo courtesy of locket479.

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