Rebuilding Your Credit

Following Chapter 7 bankruptcy, your next challenge is rebuilding your credit. Look over your credit reports from the major credit-reporting bureaus: Experian, Equifax, and TransUnion. You are entitled to one free report every 12 months from each. A Chapter 7 bankruptcy will be on your credit report for 10 years.

A good chunk of your credit-report negatives should have been removed or changed to reflect your new financial status. If you dispute anything, promptly contact the credit-reporting bureaus. Or, hire a reputable credit-repair company to do it for you.

Next, apply for a secured credit card or secured loan to establish a history of reliably paying back loans. A credit card or loan is “secured” when you provide your own money as collateral. To receive the credit card, you’ll place a deposit that matches the card’s credit limit. For a loan, you’ll place an amount of money equal to the size of the loan in a special account that is inaccessible to you until you pay off the loan.

Make sure to pay monthly loan payments on time. Credit-card purchases should never total more than 30 percent of your credit limit. Again, make timely payments … ideally in full.

If you follow this game plan, offers of credit frequently will be extended to you within months after the close of bankruptcy. In a creditor’s eyes, you are no longer swimming in debt, you will likely spend more cautiously, and you are ineligible to file for bankruptcy again for another eight years. Bankruptcy may temporarily challenge your credit situation, but it need not ruin it.