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Your Credit After Bankruptcy

March 19, 2012

Below is a terrific example of the path to rebuilding credit after bankruptcy:

Rebuilding your credit after bankruptcy is a straightforward process. Your credit score is the credit industry’s way of predicting how likely you are to pay your loans on time. The scoring model gives greatest weight to recent events, so your score can quickly drop when you are late, but can also improve quickly with on-time payments.

The most common credit scoring model is the FICO score, used by Equifax, Experian, and Trans Union. A consumer is assigned a FICO score between 300 and $850. For most people, filing bankruptcy will cause the credit score to drop into the 400-500 range. The bankruptcy filing will stay on your credit report for up to ten years.

You can rebuild your credit using the path outlined above. After your bankruptcy discharge you should obtain free credit reports from Exquifax, Experian, and Trans Union. You can obtain these reports for free without a credit card from

Review your reports for errors. Discharged debts should be listed as "discharged in bankruptcy" with a zero balance. Any secured property that was surrendered back to the creditor should not be listed as a repossession. The automatic stay prohibits creditors from providing negative information to the credit bureau during bankruptcy in an attempt to collect a debt or coerce payment.

Obtaining a credit card is a good way to rebuild credit, but be careful! Some credit card offers come with high fees. In many cases a secured card is more sensible. A secured card is a Visa or MasterCard that is secured by a bank deposit. Additionally, if you are still struggling financially, it is probably best to postpone the credit rebuilding process. Late payments after bankruptcy will seriously harm your credit score.

Rebuilding credit is not difficult, it simply takes time and effort. Bankruptcy promises a "fresh start," but it is up to you to take advantage of this new financial opportunity.



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