Rebuilding Credit After Bankruptcy

Rebuilding credit after bankruptcy is really about starting new lines of credit and maintaining them to keep them in good standing. There are two different types of credit to use to rebuild your credit score. One is an installment loan which includes auto loans, mortgages and student loans. The other is revolving credit which includes credit cards.

The first line of credit you will be eligible for after a bankruptcy discharge it is a secured credit card. You'll have to open a special account at the issuing bank and deposit an amount that is usually around $200-$500. This amount will be used as collateral against your secured card.

You will want to use this on a regular basis, but use it lightly for small purchases and always be sure to pay off the full balance at the end of the month. Make sure that the card issuer reports to all three major credit bureaus so that your credit activity will be reflected on your credit report. Look for a card with no application fee and a low annual fee. Another nice feature to look for is a secured card that can be converted into an unsecured card after a period of 12 to 18 months.

An auto loan will most likely be your next available option toward rebuilding credit after bankruptcy, but it comes with a high cost. The interest rate you will have to pay will be much higher than the standard rate. However, after diligently making your car payments on time you will be eligible for a lower rate on a different vehicle. Installment loans such as auto loans will give your credit score a nice boost.

Yes, it's hard work and a long haul to reestablishing your credit. It takes discipline, a positive attitude and a whole lot of perseverance. You've been given a second chance so it's up to you to avoid repeating past mistakes.

Rebuilding Credit After Bankruptcy
Learn more about rebuilding your post bankruptcy credit rating.