Building Credit After Bankruptcy

 How can you build credit after a bankruptcy?  A bankruptcy filing will stay on your credit report for 7 to 10 years but it is important to remember that it becomes less important to your overall credit rating as time goes by.  As a result, it’s very important that you start showing responsible credit behavior as soon as you can.

A quick and effective way to put a positive mark on your report is to obtain a personal loan from your bank.  A personal loan shortly after bankruptcy is not as impossible as it may seem.  You need to work with your banker to create a win win situation for both of you and there is an easy way to do that.

As soon after the bankruptcy as you can accumulate $1,000, go visit the bank where your checking account is.  Explain to the loan officer that you are trying to start rebuilding your credit and you would like to do this through a personal loan.  Further explain that you would like to purchase a $1,000 six month CD from the bank and pledge that as collateral for the loan.

What you have done is presented a proposal where the bank sells a product (the CD) and gets a secured loan and earns the interest off that loan.  This makes it an easy decision for the loan officer.

What you get is an almost immediate posting of a loan on your credit report, and providing you make your payments on time, an immediate demonstration that your credit management is pointing in the right direction.  Take the $1,000 from the loan and open a savings account.  Use this money to pay back the loan.  You will be out the cost of the loan interest but that will be offset somewhat by the interest on the CD and the savings account.

At the end of six months you may want to consider repeating the process.  At the very least ask your banker to make a recommendation for a secured credit card.  If his bank provides that service make sure you can afford the fees and make sure the bank reports it as a standard credit card and not a secured card.

This one strategy will get you started on the road to better credit after a bankruptcy