How to Build Credit After a Bankruptcy

A man looks at his phone while holding an apple in his other hand.

Through December 31, 2023, Experian, TransUnion and Equifax will offer all U.S. consumers free weekly credit reports through to help you protect your financial health during the sudden and unprecedented hardship caused by COVID-19.

Bankruptcy is a difficult legal process that can have a severe, negative impact on your credit. But the good news is, no matter how much damage is done to your credit, it won't last forever.

Bankruptcy stays on your credit report for seven or 10 years, but its impact lessens as time passes. In the meantime, you can start improving your credit right away by taking some proactive steps.

Practice Good Credit Habits

Practicing good financial habits is the key to building excellent credit after a bankruptcy. When you stick to these principles, your credit can recover from any setback:

  • Make all debt payments on time. Payment history is the single biggest factor in determining your credit scores. When you make credit card and loan payments on time, you add new, positive information to your credit reports. This helps build up your scores and shows future creditors that you're a reliable borrower.
  • Stay on top of bills. Timely payments of household bills like cellphone and utility accounts help you avoid late fees and prevent accounts from going to collections, where they can damage your credit. Now, on-time payments of your cellphone, utility and even your video streaming and cable bills can actually help you build up your credit scores with Experian Boost®ø. This free service gives you credit for on-time monthly payments that previously couldn't help your credit, often resulting in an instant increase to your Experian FICO® Score .
  • Avoid using plastic. Having a credit card and making your monthly payments is a great way to build credit. But contrary to popular myth, carrying a balance on your card isn't necessary to maintain good credit. In fact, one of the best and quickest ways to build good credit is to pay off your credit card balances—and continue paying them off, in full, every month.
  • Save for emergencies. When you don't have money in savings, a small but unexpected expense can throw your finances out of whack, tempting you to take on new debt or skip bill payments. Even if you can't afford to put tons of money into an emergency savings fund, start by working towards a goal that's achievable for you, like saving one month's rent. The best way to get started is to automatically set aside a little bit of cash from every paycheck.
  • Give it time. When it comes to credit, quick fixes tend to cause more problems than they solve. Credit repair companies claim they can repair your credit fast, but their solution comes with a price tag and may include big risks. At the end of the day, the cheapest and most effective way to improve your credit is to work on it yourself.

Apply for a Secured Credit Card

After a bankruptcy, it may be difficult to get approved for new loans or credit cards. But having open credit accounts helps you to rebuild your credit. So what do you do?

Secured credit cards are a great way to get started. You don't need good credit to qualify for a secured credit card. Instead, you qualify by making a deposit that the creditor can keep if you stop making payments on the account. Here are a few key features to look for in a secured card:

  • Reporting to credit bureaus: Make sure the card issuer will report your account information to all three major credit bureaus (Experian, TransUnion and Equifax), giving you a better opportunity to build up all of your credit scores.
  • Conversion option: Ideally your secured credit card will "convert" to unsecured after a set period of time. When it converts, you get your deposit back, as long as you've paid your balance. You can also keep using the card to help you continue building your credit history.
  • Deposit amount: The larger the deposit on a secured card, the higher your credit limit. Having more credit available—that you're not using—helps you improve your credit utilization ratio and build up your scores.
  • Rates and fees: Fees and interest rates may be high compared with unsecured cards. Make sure you review the annual percentage rate (APR), annual fee, maintenance fee and any other fees to choose the best secured card and keep your costs to a minimum.

Many credit unions offer secured credit cards, and some banks too. You can also use Experian CreditMatch™ to compare multiple secured credit card offers in one place.

Look Into a Credit-Builder Loan

It's normal to be nervous about taking out a loan after bankruptcy, but credit-builder loans come with features that help you rebuild your credit with less risk.

A credit-builder loan works sort of like a loan in reverse. Instead of getting a lump sum of money upfront, you make monthly payments into a savings account that's managed by the lender. At the end of your payment term, which is usually one to two years, you receive the money you paid into the account. Typically the full amount is $1,000 or less.

Not every bank offers credit builder loans, but you can find them through local credit unions, community banks or by searching online.

Monitor Your Credit

Keeping an eye on your credit information is a crucial part of recovering from a bankruptcy. After filing, you'll want to regularly monitor your credit to keep an eye on the accounts that are discharged and make sure they're reported correctly.

Monitoring your credit can also help you catch errors and early signs of identity theft, like loan applications made in your name, before they snowball out of control.

There are a few great ways to review your credit information for free. One way is to visit for copies of all three of your credit reports once a year—now available once a week, through April 2022, as a result of the COVID-19 pandemic.

For access to your credit information and free alert notifications, you can also sign up for free to see your Experian credit report every 30 days.

Life After Bankruptcy

After you file for bankruptcy, there's no magic trick that makes your credit rebound overnight. Building great credit takes time, but understanding what goes into your credit reports and scores will help you speed up the process.

Avoiding loans and credit cards might feel like your best bet after a bankruptcy, but if you don't have any open accounts, it can be nearly impossible to add new, positive information to your credit file.

Instead of swearing off credit forever, focus on using credit cards and loans sparingly, making all of your payments on time, and regularly monitoring your credit information. Together these steps can you help you rebuild strong credit within a few years of filing for bankruptcy.