How to Rebuild Credit After Bankruptcy

By Mike G.

A bankruptcy stays on your credit report for years, but it doesn’t freeze your credit in place. Rebuilding starts with making sure the report is accurate, then adding new on-time payment history, one account at a time.

How long bankruptcy stays on your credit report

Federal law allows a bankruptcy to be reported for up to 10 years from the date of filing.[1] In practice, a Chapter 13 bankruptcy is generally removed after seven years, compared with 10 for Chapter 7.[2] Removal is automatic when the reporting period ends.[2] If it’s still listed after that, disputing outdated information is free.[10]

The listing and its effect on your score are two different things. In general, recent negative information affects a credit score more than older information, so a bankruptcy’s effect lessens as it ages.[2]

Step 1: Check your credit reports

Get your reports from all three bureaus for free at AnnualCreditReport.com.[5] After a discharge, check that:

  • Debts discharged in the bankruptcy are reported as included in the bankruptcy, not as still owed
  • No collector is still reporting a discharged debt as owed
  • Your personal information and account details are correct

If something is wrong, dispute it with the credit bureau and the company that reported it.[3] Incorrect information can bring a score down, so fixing it quickly matters.[3] Checking again every few months during the first year catches problems early.

Step 2: Add new, positive history

Your score improves as new accounts report on-time payments. Common ways to start:

  • A secured credit card. With most of these cards, you put down a deposit equal to your credit limit. Use it for small purchases and pay it off every month. Fees and interest rates on secured cards can be high, so it helps to compare cards and confirm the issuer reports to the credit bureaus.[2]
  • A credit-builder loan. Offered by some banks and credit unions: the loan amount is held in a savings account while you make payments, and you receive it at the end. The payments are reported to the credit bureaus.[6]
  • Becoming an authorized user on a card held by someone you trust. Card issuers usually report authorized users to the credit bureaus, so the account’s history, good or bad, may appear on your report.[7]

One or two accounts are enough to start. Opening several new accounts in a short time can lower a credit score, so spacing them out helps.[2]

Step 3: Keep the habits that matter most

  • Pay every bill on time. Payment history is one of the biggest factors in credit scores. Autopay for at least the minimum protects against a missed due date.[4]
  • Keep balances low compared with your credit limits, and pay cards in full when you can. You don’t need to carry a balance or pay interest to build credit.[4]
  • Think before closing accounts. Closing accounts can reduce your total available credit, which can hurt your score.[4]
  • Keep your budget in check. The same pressures that led to the bankruptcy can come back. A small emergency fund keeps a surprise bill off a credit card.

Chapter 7 vs. Chapter 13: when rebuilding starts

A Chapter 7 discharge usually comes a few months after filing, and rebuilding can start right away.[11] In Chapter 13 you’re in a repayment plan for three to five years.[8] During the plan, new debt generally shouldn’t be taken on without consulting the trustee, since it could affect your ability to finish the plan, and local court rules may also require approval.[8][9] For many people, most rebuilding happens after the plan is finished.

What to avoid

  • Credit repair companies that promise to remove the bankruptcy. No one can legally remove accurate, current information from your credit report. Anything a credit repair company can legally do, you can do yourself for little or no cost.[10]
  • Lenders who target people fresh out of bankruptcy with very high rates. Compare the total cost before borrowing.
  • Cosigning for someone else. If they miss payments, it lands on your credit.
  • Taking on new debt faster than your budget can handle. The goal is positive history, not new balances.

Still weighing whether to file?

The bankruptcy guide explains Chapter 7 and Chapter 13 and when to talk to a lawyer. The Debt Audit shows whether another path might fit your numbers first. It takes about five minutes, and nothing you enter is stored or sent.

Run the Debt Audit

Frequently asked questions

How long does it take to rebuild credit after bankruptcy?

It depends on your starting point and what you do after the discharge. A bankruptcy’s effect lessens as it ages and as new on-time payments build up, but there’s no fixed timeline. Checking your reports for errors and opening a secured card or credit-builder loan are the usual first steps.

How long does bankruptcy stay on your credit report?

Up to 10 years from the filing date under federal law. Chapter 13 bankruptcies are generally removed after seven years. Removal is automatic when the reporting period ends.

Can I get a credit card after bankruptcy?

Often, yes. A secured credit card is usually the easiest to get, since your deposit backs the credit line. Compare fees and rates, which can be high.

Can I get a mortgage after bankruptcy?

Lenders and loan programs set their own rules for borrowers with a past bankruptcy. A lender can tell you which rules apply and what they’d need to see.

Can a credit repair company remove a bankruptcy from my report?

No. Accurate, current information can’t legally be removed. A company promising that is a red flag. You can dispute genuine errors yourself, for little or no cost.

Related

Sources

  1. 15 U.S.C. § 1681c, Requirements relating to information contained in consumer reports. U.S. Government Publishing Office (govinfo).
  2. How to rebuild your credit. Consumer Financial Protection Bureau.
  3. How do I dispute an error on my credit report? Consumer Financial Protection Bureau.
  4. How do I get and keep a good credit score? Consumer Financial Protection Bureau.
  5. Free Credit Reports. Federal Trade Commission.
  6. What are some ways to start or rebuild a good credit history? Consumer Financial Protection Bureau.
  7. I was an authorized user on my deceased relative’s credit card account. Am I liable to repay the debt? Consumer Financial Protection Bureau.
  8. Chapter 13: Bankruptcy Basics. United States Courts.
  9. 11 U.S.C. § 1305, Filing and allowance of postpetition claims. U.S. Government Publishing Office (govinfo).
  10. Fixing Your Credit FAQs. Federal Trade Commission.
  11. Discharge in Bankruptcy: Bankruptcy Basics. United States Courts.