Rebuilding Credit After Bankruptcy

rebuilding credit - Bankruptcy Attorney Can helpRebuilding credit is important to anyone who has recently filed bankruptcy. You may have gone through a long period of time where your finances were confusing; however, you now have a second chance. After bankruptcy, rebuilding credit is possible with careful attention to your finances.

If you have questions about bankruptcy or rebuilding credit, contact Allmand Law Firm, PLLC today. We have worked with many clients who are trying to get back on track after bankruptcy. Call us today to learn more about how we can help you.

Understanding How Bankruptcy Will Affect Your Credit Score

If you are considering bankruptcy, your credit score is likely low already. However, you may be concerned about how low it will go if you file bankruptcy. In actuality, the damage that bankruptcy will have on your credit score depends on how your credit was prior to filing.

If you have many accounts that are delinquent with late payments and your debt-to-asset ratio is high prior to bankruptcy, then your score is likely already low. Filing bankruptcy will eliminate late payments and reduce your debt-to-asset ratio. Thus, although the bankruptcy will negatively impact your score, it will also have some positive impact. Your score may not drop as low as you think it will after bankruptcy.

However, if you have very few late payments and simply don’t feel like you can keep making those payments, then your credit score may take a bigger hit. It’s best to consult with a bankruptcy attorney before filing bankruptcy so that you can understand your options and how bankruptcy will impact you specifically.

Bankruptcy Can Improve Your Credit Score Over Time

Bankruptcy will give you relief that can help you with rebuilding credit over time. Although the bankruptcy will appear on your credit report for several years, it will reduce the impact of other negative aspects of your credit quickly. A Chapter 13 bankruptcy will be on your credit report for seven years and a Chapter 7 bankruptcy will be on it for 10 years. There are exceptions, and credit reporting agencies may continue to report your bankruptcy longer than 10 years in specific situations.

Bankruptcy will reduce your overall debt ratio and remove the negative impact of late payments and many other credit killers. So, while a bankruptcy itself will also negatively impact your credit, the impact of all the other negative pieces that could be fixed by bankruptcy may be much greater.

Working hard at rebuilding credit after bankruptcy can be difficult, but over time it will happen. A financial advisor can help you understand exactly how bankruptcy will impact your credit score.

Will Bankruptcy Negatively Impact My Credit Score?

If you have made the decision to file for Chapter 7 or Chapter 13 bankruptcy, you have probably heard that it could have a negative impact on your credit score. While this may be true, it is important to remember that the effects of your bankruptcy do not have to be permanent. If you take the right steps to rebuild your credit after bankruptcy, it will not be long before your credit score bounces back.

There are many ways to rebuild your credit after bankruptcy, including:

  • Check your credit report annually and report any errors
  • If you don’t qualify for a credit card, apply for a secured card
  • Create a monthly budget, and pay all of your bills on time
  • Avoid utilizing a large amount of your available credit

#1: Review Your Credit Report Annually

Rebuilding Credit - Dallas bankruptcy attorneyOnce you have completed the bankruptcy process, it is important to know exactly where you stand. Start by requesting a copy of your credit report from all of the major bureaus, such as Equifax, Experian and TransUnion. You are entitled to one free copy of your credit report each year. If you notice that any of these reports contain inaccurate or inconsistent information about your debt or payment history, you can and should dispute it.

#2: Start Using a Secured Credit Card

One of the most effective ways to rebuild your credit after bankruptcy is to start using a secured card—since you may not qualify for a traditional credit card. With a secured credit card, you would deposit money into a savings account and use this deposit to secure a line of credit. Your credit limit would then be the amount of the deposit, minus any fees. It is important to choose a card that reports to all three credit bureaus.

#3: Make All of Your Payments On Time

After filing for bankruptcy, it is imperative that you start paying your bills on time. Payment history makes up 35% of your credit score, so making on-time payments is one of the easiest ways to rebuild your credit. If you have a tendency to fall behind on your bills, you should create a monthly budget and stick to it. Now is the time to break bad financial habits. Sticking to a budget will also help you build up your savings. Request a free consultation with the Dallas Bankruptcy lawyers at our firm to find out more.

#4: Pay Off Your Balance Every Month

You may have heard that carrying a balance is good for your credit score, but that’s not necessarily true. If your credit score was damaged when you filed for bankruptcy, credit bureaus want to see that you are capable of repaying your debts. For this reason, you should get in the habit of only spending what you are able to repay at the end of the month. Paying off your balance each month is a good way to break the debt cycle.

Things That Can Improve Your Credit Score After Bankruptcy

There may be characteristics of your credit history that will help you in rebuilding credit after bankruptcy. Your credit score factors in many aspects of your credit history. The following factors can improve your credit score even if you’ve recently filed bankruptcy:

  • Long term credit history;
  • Good payment history;
  • Low debt-to-asset ratio; and
  • Low number of credit items you’ve applied for.

When rebuilding credit, you need to keep the aforementioned factors in mind. You should not close your oldest credit cards unless absolutely necessary. Instead, pay them off and don’t use the cards. This will improve your long term credit history. Also, maintain regular payments and avoid late payments. Try to maintain a low debt-to-asset ration, which can be improved through bankruptcy. Also, don’t apply for too many new credit accounts. If you have several credit checks on your report, it can negatively impact your credit score.

Obtaining Loans After Bankruptcy

While you are rebuilding credit after bankruptcy, you will have an opportunity to get home mortgages, car loans, and more. However, you should carefully consider your financial situation before getting into debt again. You may have many options for personal loans. You should work with a financial advisor before taking any significant financial steps after bankruptcy.

After your bankruptcy concludes, you will likely be able to get a car loan immediately. However, the terms of that loan will likely be less than premium. It may have an extremely high interest rate or you may be required to put up a significant amount for a down payment. It’s often best to wait some time until you can qualify for a better quality car loan.

Most banks will want you to wait a few years after bankruptcy before you obtain a new mortgage. Some FHA-insured loans may be available to you within a year after Chapter 13 and two years after a Chapter 7. However, other loans may require more of a wait time after your bankruptcy concludes.

Rebuilding credit after bankruptcy can be extremely difficult. However, home mortgages, car loans, business loans, and more will be an option to you eventually.

Request Your Free Bankruptcy Consultation Today

If you have questions about bankruptcy, including how it could affect your credit score, we encourage you to speak with a Dallas bankruptcy attorney at Allmand Law Firm, PLLC. As the largest bankruptcy filing firm in the state, we have helped thousands of people regain control of their finances. We can help you with rebuilding your credit after bankruptcy.


Do not wait to get the help you need. Call our office today to request your free financial empowerment session!