Surprisingly, credit repair can be quite simple after a bankruptcy. The beauty of bankruptcy is that going through one successfully means your debts are virtually wiped clean, in many cases. There are a lot of opportunities to get credit after filing a personal bankruptcy, but those options may look a little different than you're used to.

After a Personal Bankruptcy

Credit Repair After BankruptcyWhen you file for personal bankruptcy, you choose either a Chapter 7 or a Chapter 13. A Chapter 7 is known as a liquidation bankruptcy, and it's a short process where your bankruptcy trustee is responsible for selling off your nonexempt property in order to repay your creditors. A Chapter 13 allows you time to attempt to repay your debts, you come up with a payment plan you can stick to with the help of your trustee.

In both cases, a bankruptcy lowers your credit score quite a bit and may leave you searching for subprime lenders if you need to borrow again. A bankruptcy stays on your credit reports for seven or 10 years, depending on the chapter you file. It's impact on your score lessens with each year, though.

3 Steps to Repairing Your Credit After Bankruptcy

The key to repairing your credit after a bankruptcy is take advantage of your clean slate, and begin practicing good-credit habits. There are several practices you can pick up that can build your credit.

These four habits could help:

  1. Avoid using credit cards. If you don't have the cash to make the purchase, don't pull out the plastic! Getting into bad spending habits could land you right back in a bankruptcy. It's a best practice to only buy on credit what you can afford in cash. This way, if you use the card to earn points or save miles, you can. But, put the money for the purchase aside and pay off the whole bill, not just the minimum payment.
  2. Stay up to date on your bills. Another step to building credit and not falling back into bankruptcy patterns is to stay on top of your bills. This means not having to choose which you're paying, and being smart about how you pay them. Don't let small bills fall through the cracks.
  3. Pay your bills on time, everytime. This is one of the biggest keys to repairing your credit after a bankruptcy. Payment history makes up 35% of your credit score, so paying all your bills on time can really bring up your credit score.
  4. Be patient. Remember, time heals all wounds, and that goes for gashes to your credit score as well. Going through a bankruptcy damage lessens after each passing year. If you stay on top of your bills, avoid things in collections, and avoid defaults, your credit reports will thank you.

Unfortunately, passive credit improvement isn't the fastest track you can take. In order to build your credit after a bankruptcy, you may have to take action to see real results.

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3 Actions That Can Build Credit

Credit repair after a bankruptcy is possible, and there are several ways you can do this. Since you're likely facing a lower credit score than before you filed, there may be a few extra steps needed to find the credit you're looking for.

If you need to start building back your credit score, try these three options:

  1. Get a secured credit card. A secured credit card is a card where you make an initial deposit which becomes your limit. If you use a secured credit card responsibly, you typically get your initial deposit back once the balance is paid off. If you don't manage your credit and begin to miss payments, your deposit can be used to cover the bills. Secured credit cards give you a chance to build credit by making on-time payments, and by adding a line of revolving credit to your credit reports. Keeping a good mix of credit cards and installment loans also helps.
  2. Get a credit builder loan. A credit builder loan is a similar concept to a secured credit card. You make deposits into an account and build your credit by making the payments over a set amount of time, generally around one to two years. Once you've completed the loan, you get the money. It’s reported like an installment loan.
  3. Build credit with a car loan. A bad credit auto loan is a great way to work on credit repair after bankruptcy. By applying with a subprime lender through a special finance dealer, your credit doesn't stand between you and the vehicle you need. Each on-time payment improves your credit score, and you add an installment loan to your credit reports. Plus, car loans tend to be long – usually four years or more – which gives you a wonderful opportunity to build your credit over a long period of time.

Improve Your Credit With an Auto Loan

If you're ready to jump into repairing your credit after your bankruptcy is discharged, you can start right here at Auto Credit Express. We want to take the sting out of searching for the right lender to finance your next auto loan by matching you to a local dealership that can help.

We've been connecting people to dealers in their area for over 20 years, and we want to do the same for you. To get started toward your next car loan now, simply fill out our fast, free, and no-obligation auto loan request form.