Improving Credit After Chapter 7 Bankruptcy: Top 10 Tips for Getting a Great Credit Post-Bankruptcy Discharge

Chapter 7 bankruptcy is not the end of a long journey, but rather the start of an even longer, more positive journey. Improving credit after bankruptcy is not as hard as you think it might be. You have to actively take a few steps to improve your credit, but it is definitely possible.

Filling bankruptcy impacts your credit; a common misconception is that impact is always negative. Depending on where you stand prior to filing will determine whether your credit score goes up or down. If you were to file bankruptcy and you had good to great credit your score will likely go down. However, if you have a very low credit score it will likely go up. Many of our clients have seen credit scores in the low to mid 600s after achieving their discharges. After discharge, many individuals can see an even higher credit score by actively working on their credit and taking many steps on our list. Thankfully, you can overcome the credit damage by implementing smart strategies. Here are ten ways to build up your credit rating after a bankruptcy.

Getting back on track and achieving goals like buying a new house two to three years after a Chapter 7 discharge is possible. You just need to actively work on your credit and take some of the steps we recommend. After understanding what factors are consider as part of your credit score, then you need to start taking steps to put positive history on your credit report.

1. Check your credit report

The main purpose of bankruptcy is to get rid of debt. It is important to check your credit about three months after your discharge to make sure all your accounts that were included in your Chapter 7 bankruptcy are showing as a zero-balance due. Some creditors will close and zero out any accounts before your discharge; but legally they are not required to until after discharge. Any accounts that are still showing a balance due will negatively affect your credit score and make it lower than it should be after the bankruptcy discharge. The accounts should also not be reporting any new missed payments or delinquencies.

You can pull free credit reports from the website If there is something that is wrong on your credit report, you will have to take steps to dispute it with the credit agencies with the discharge paperwork from the bankruptcy. Once the agencies make the proper corrections your credit score will begin to improve. You can also look at credit reports through companies like Credit Karma or Credit Sesame (NOTE: these accounts are accurate for what is reporting, but do not provide an accurate credit score. These programs use a different scoring model; but the fluctuation of the fact credit is trending upward or downward is accurate).

After the bankruptcy you need to continue checking your credit report regularly. You can either check your credit manually or sign up for a credit monitoring service. While working on your credit, it is important to make sure all the information is reporting correctly. It will also help you notice if there are any negatives reporting and correct those items as soon as possible. Monitoring credit can also help you better understand what factors impact your credit the most.

2. Keep paying any reaffirmed or non-discharged debts

Some debts do not go away with bankruptcy and/or you can choose to reaffirm a debt. Reaffirming a debt means that you are still personally responsible for the balance of the debt even after receiving your discharge in a bankruptcy. A common reaffirmed debt may be a car loan and a common non-discharged debt is a student loan.

Since these debts may report on your credit after bankruptcy, it can help you improve your credit. These debts can help jump start your credit rebuilding journey.

Instead of having to apply for and obtain new loans and credit cards, you’ve got what you need to add excellent information to your credit reports. Payment history is the most important credit scoring factor, so respect those due dates. And if you still have a credit card, charge only what you can and repay it in full when the bill comes in.

A Chapter 7 bankruptcy will stay on your credit reports for a total of 10 years, but as add new accounts and payment history to your credit reports responsible credit usage, your scores will increase, especially as the bankruptcy ages. The credit scoring model uses newer items on your credit as a higher factor than older items. So payment history and positive on your accounts over the past 2 years will have a more positive impact than any negative items that are from 4 years ago.

3. Apply for a secured credit card

Most people will have no debts or accounts after getting their bankruptcy discharge. The best thing to do once you have that discharge is to apply for a secure credit card from your banking institution.
Secured credit cards are collateralized by a cash deposit that usually matches the credit line. So, if you put down $500, that same amount will be your limit. Many creditors will release the money back to you after you make a certain number of on-time payments, turning it into an unsecured card. Some even offer a rewards program so you can earn as you charge.

Usually, your local bank or credit union will offer a secured credit card to current customers, but there are many great options out there. Wall Street Journal has ranked the secured credit cards available. 

4. Consider a bankruptcy-friendly unsecured credit card

Another option is to obtain an unsecured starter credit card that’s specifically for people who have filed for bankruptcy. However, the limits are usually low, many charge an annual fee, and they are less apt to have rewards programs. Alternatively, local credit unions often offer great starter cards (which may even have rewards). But, you need to be a member of the credit union and not have discharged any debts with that credit union during your bankruptcy. Often setting up a bank account with the credit union before filing bankruptcy can even help my establishing a relationship with the credit union for a longer period of time.

It also may be appealing to get a department store or gas credit card as those have lower qualifications to be approved. However, store cards these often come with high interest rates and low limits. Be aware of those potential limitations when applying for and using the cards.

The sooner you start working on improving your credit score the better off you are going to be. We often see clients with over 600 credit scores 12 months after getting their bankruptcy discharge.
It’s important to keep in mind that credit utilization is the second most important FICO scoring factor. With any credit card you get moving forward it will be key to keeping your balances under 30% of your max limit. If you have a low-limit credit card that you are regularly using, you may need to make more frequent payments to keep your utilization low.

5. Pay all bills on time

The most important factor of your credit score is payment history. Your payment history makes up 35%. This means paying into your credit accounts on time will ensure you are keeping your credit score as high as possible. Payment history is often also the first thing any lender reviews to figure out the amount of risk it will take on when extending credit.

Now usually, credit card and loan companies will only report if you are behind 30 days or more. But, if you are late even a couple days, a credit card company may report you late. If you accidentally miss a payment, pay the payment as soon as you remember and see if your bank will issue a one-time forgiveness for the error (either ensuring it isn’t on your credit report and/or waiving the late fee).

Also, you need to ensure you are paying your other bills on time, like rent, utilities, medical bills, etc. While these bills do not report monthly on your credit report, if you get delinquent with these types of monthly accounts, the service provided can and will report the delinquency on your credit report and that negative mark will hurt your credit overall.

6. Use auto pay with credit cards for fixed bills

One of the best tips you can get about improving credit after bankruptcy is making sure you are using your credit cards at least a minimum each month. Whichever credit card you have, simplify your credit score repair plan. Decide on a fixed monthly expense (think cable bill or gym membership), charge it to your card and then have that sum automatically satisfied via your bank’s bill pay system. So basically your credit improvement is on autopilot in this situation; just make sure those two payments are being paid each month.

Aside from this strategy being easy, it will ensure that a steady stream of positive data is being added to your credit report. With consistent charging and repaying, you’re demonstrating that you’re a reliable borrower, so your scores will rise.

7. Get a co-signer

Becoming a co-signer on a loan is a great way to start improving your credit. This may make sense if you need to finance something expensive, like a car. If you know someone with impressive credit scores and a high income who is willing to act as a co-signer, that’s another way in. Loans that last a couple of years will help lengthen your overall credit history.

The loan will appear on each of your credit reports and will be calculated into your credit scores, but both of you will be liable for the debt. If you don’t pay as you should, the person who co-signed with you would be liable for the debt.

That arrangement should be fine with the lender because the co-signer is a low-risk borrower, but you will have to take pains to pay on time. If you don’t, not only will your credit rating go backward, but you could also jeopardize a valued relationship.

8. Become an authorized user

A less risky option for someone willing to help you out is for them to make you an authorized user on a credit card under their name. The account would be listed on your credit report and be a factor on your credit. You will not be responsible for the debt on the account.

Even though you will not be responsible for the debt, it is important that you keep an eye on the account so that it helps your credit and the responsible party is paying on the account. Once your own credit has risen significantly you can be asked to be removed from the account (or stay on the credit card to keep the added benefit). But, there is always a risk that if the person who added you onto their card hits rough times, he or she may miss payments. So only agree to be added as an authorized user to someone you can trust to keep making payments.

NOTE: Authorized user accounts likely will not help your score in situations like applying for a mortgage. Mortgage companies commonly disregard authorized user accounts and even use their own scoring system since it is not usually the individually paying the debt. But many credit card and personal loan applications only consider the overall score, not individual accounts.

This authorized user trick is also great for parents hoping to help their kids improve their credit. Parents can open a credit card and add their children (at any age) as an authorized user on their account. This can help kids ensure they have great credit when they reach 18.

9. Use programs like Experian Boost

To improve your credit after bankruptcy, sometimes it can be easier to use the payment history for bills you are already paying. There are many programs that may take payment history from everyday bills. A newer product, Experian Boost that is being offered by the credit bureau Experian is helping individuals with little or poor payment history to show more information. To participate, consumers who want to use Boost must allow the program to scan their bank account transactions to identify monthly payments, like streaming, utility, cell phone and rental payments. Then, the program adds the information about on-time payments to their Experian credit report.

NOTE: Experian Boost will only help your Experian Credit Score; it has no impact on TransUnion or Equifax. report and be used when certain credit scores are calculated from that data. This means if your bank or lender is using one of the two other credit bureaus, this will not help. However, the program may help someone get a new credit card to then add other payment history to the other credit bureau reports. An added benefit is that that Boost only adds your positive payment history, so missed payments from the added monthly payments will not hurt your score.

There are also other programs like rent-reporting services that can help. Some companies offer to have your rent payments reported to the credit bureaus, allowing you to build your credit file. These programs will report on-time and late rent payments and usually will report to all credit bureaus.

10. Take out a credit builder loan

To create an even higher credit score after a bankruptcy and prove that you can handle a variety of credit products, you may want to consider a credit builder loan. Credit mix makes up 10% of your credit score; basically, the credit bureaus consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. Credit cards are revolving accounts and are one type of debt; loans are considered installment payments and are another type of debt.

This is where loans come in. Since you may not qualify for an unsecured loan, consider a credit builder loan instead. Offered by various banks and credit unions, these loans work similar to secured credit cards. You put down a certain amount of money and then a loan in that amount is extended to you. Essentially, you’re just borrowing your own cash. As with all loans, it comes with a payoff schedule and fixed monthly payments.; some banks even offer loans where your money will be invested in a certificate of deposit to ensure you earn some interest.

The lender sends your account activity to the credit reporting bureaus, and your credit will improve with your history of steady payments. Once paid, the lender returns the deposit (along with any earned interest).

Credit and Debt After Bankruptcy

Getting back on track financially after bankruptcy can be rough. Usually it depends on the cause of bankruptcy and whether the financial issue has resolved. Recovering and improving credit after bankruptcy is usually easier when the issue was a financial road speed bump and you are back on track. If you lost your job and now are employed again, steps to improve credit are often easier to take. But, if you are experiencing on-going health issues or have new employment with reduced income, it may be more difficult to rebuild.

Remember that improving credit is not all or nothing. After bankruptcy, if you are able to improve your credit 10 or 20 points, it is still an improvement. Credit in process and a journey, you do not have to achieve perfect credit immediately. Everyone will work at their own pace and make their own process as much as they can; it is about doing the best you can with your current situation.

Avoid accumulating debt again

Sometimes debt is inevitable, but we recommend avoiding it as much as possible. Paying off your credit card balances in full every month is one of the best ways to avoid accumulating debt. If you can’t pay off your entire balance, try to pay as much as possible to minimize the amount of interest you will have to pay. You should also work on building up an emergency savings fund, so you have money set aside to cover unexpected expenses.

Finally, budgeting and monitoring your expenses each month can help limit debt. If you do incur debt unexpectedly, you just need to make sure and pay it off as soon as possible; and always make sure that you have made at least the minimum payment. Paying more than the minimum payment each month will also help make sure the debt has a lesser impact.

Good credit is possible after bankruptcy

With work and taking the right steps you can have a very good credit score after getting your bankruptcy discharge.

Getting help with filing bankruptcy and improving your credit after bankruptcy

If you are dealing with improving your credit, make sure you understand all your options. Ashley F. Morgan Law, PC helps many individuals manage their debts and their credit score every month. Attorney Ashley Morgan has experience dealing with issues related to credit and debt. Ashley understands good credit is important. She also helps all of her bankruptcy clients after their discharge review their credit and get back on track. Giving advise about improving credit after bankruptcy is included as part of her bankruptcy packages to her clients.