Bankruptcy and Rebuilding Your Credit Score

Rebuilding your credit after bankruptcy can be done!


Photo Credit: Stuart Miles /

While it may seem devastating, bankruptcy can allow for you to have a fresh start at your financial freedom. Recovering from bankruptcy does take time, diligence and patience – you don’t accrue debt overnight, so you cannot expect to fix it over night. Have hope though, many individuals who have declared bankruptcy have gone on to fix their credit scores and become financially successful. You too can overcome bankruptcy.

One of the main areas to focus on while recovering from bankruptcy is learning to manage your monthly bills. If you are not used to working on a budget, this can prove to be quite challenging, especially with the burden and stress of bankruptcy. Creating a budget is imperative to your future financial success and bankruptcy recovery. A budget can be time-consuming to initially set-up, but once you do the initial work ,the rest is easy. Some important categories that need to be included in your budget are:

  • Annual Expenses: car registration, taxes, HOA fees, and other yearly fees.
  • Monthly Expenses: mortgage/rent, insurance, gas, food, utilities, and other once a month expenses. Also include any payments that you must pay from your bankruptcy in this category.
  • Emergency Money: it is important to save some money in case of an emergency.
  • Retirement: don’t stop investing in your future. Allocate monthly earnings to your retirement account.
  • Savings: if you can, automatically put a portion of your monthly earnings into a saving account.

There are also many online tools, and mobile apps, that can help you create and manage a budget, getting you on track to recover from bankruptcy. Apps such as Mint, Manilla, and You Need A Budget are excellent, free resources to help you stay on track. Be diligent in paying your bills on time – a late payment could be reported on your credit score deterring all the effort you are putting into rebuilding it after bankruptcy. All of these apps allow you to set up reminders when bills are due so you can stay on top of your finances, which is part of the bankruptcy recovery process.

The next step you need to make post-bankruptcy is re-establishing your credit score. Ironic as it may seem, opening up a credit card is one of the best ways to help raise your credit score after taking a hit like bankruptcy. While this is one of the quickest ways to build up your credit, it can also be one of the most detrimental if not used properly. After bankruptcy, you may have to start with a secured credit card. A secured credit card is a credit card that allows you to put a cash payment down to “secure” your line of credit. The amount you put down is how much your line of credit will be. A word of caution must be given about opening up a credit card. You must be very careful about how you use this card. The point is to use it to build your credit, but do not use it beyond your means. Make a few purchases with it each month and then aim to pay it off in full each month. If you are careful and use your credit card properly, you will soon be eligible for non-secured cards. These cards typically have high interest rates, so being mindful of that is also suggested.

In addition to the budget and credit card, make sure you are keeping an eye on your credit score regularly. Check for inaccurate information. If you come across inaccurate information, write a letter of dispute to the agency asking for it to be removed. Here is more information on how to request the removal of inaccurate information from your credit report.

Bankruptcy can be a very stressful situation. You may need to seek out additional help in order for you to recover from bankruptcy and raise your credit score. The important thing to remember is that you CAN and WILL recover from bankruptcy. Your budget may be tight for a while and you may have to sacrifice some of the “wants” in your life, but in the end your goal is overall financial health and it will be worth every struggle you go through after bankruptcy.