How do I rebuild my credit after bankruptcy?

One of the most effective ways to rebuild your credit after bankruptcy is to obtain a credit card, and to use it responsibly and correctly.  However, there are always questions as to whether you can qualify for a credit card after filing bankruptcy.

Credit History

Between 2005 and 2007, when credit was flowing and easy to come by, it was not uncommon for people’s mailboxes to be flooded with credit card offers shortly after filing bankruptcy.  Although it is harder these days, it is not impossible.  In fact, because lenders know that debtors can only file for Chapter 7 bankruptcy once every eight years, they are willing to lend knowing that a person who filed for bankruptcy yesterday cannot file again for eight years.

Credit and Bankruptcy

Typically, if you filed bankruptcy, you will receive offers for credit cards.  However, your cards may come with annual fees and/or higher APRs.  The costs of higher APRs can be mitigated if you use your card responsibly and correctly.  One way to do so is to only use your card for groceries and gas, and then to just pay it off every month.  This will not only allow you to bypass the APR interest, but also quickly help you rebuild your credit.

Secured Credit

Another type of credit card you can apply for is a secured credit card.  A secured card is less risky for creditors because you must deposit money into a savings account in order to use the card.  The secured card limit is set at a percentage of your savings deposit, and your savings deposit is used as collateral for payment.  Because secured card payments are reported to credit bureaus, this can help rebuild your credit as well.