How to Rebuild Your Credit After Bankruptcy

Quick Answer

You can rebuild your credit after bankruptcy in several ways, including applying for a secured card, getting a credit-builder loan and becoming an authorized user on a credit card.

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Filing for bankruptcy can be necessary for you to get back on your feet financially, but the aftermath can severely damage your credit and make it difficult to get approved for loans and credit cards with favorable terms.

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

1. Check Your Credit Reports

Your credit reports provide a history of your dealings with creditors, so they can give you clues about which actions you can take to recover after filing for bankruptcy. Because credit report information can vary slightly between the major credit bureaus—Experian, TransUnion and Equifax—it's crucial that you review all three reports to get a full picture of your situation.

You can access your Experian credit report anytime for free, and you can also review your TransUnion and Equifax reports for free at

As you read your reports, look for areas where you can improve. For example, if you have past-due debt payments that aren't included in your bankruptcy, get caught up on them as quickly as possible. If you find information that's inaccurate, you have the right to file a dispute with the credit reporting agencies.

2. Check Your Credit Score

Your credit score is a three-digit number that provides a snapshot of your overall credit health based on information found in your credit reports. In other words, it can give you a general idea of how much damage the bankruptcy has caused.

With Experian, you can get free access to your FICO® Score based on your Experian credit file. To help you evaluate your situation, here are the different FICO® Score ranges:

FICO® Score Ranges
Exceptional 800 — 850
Very good 740 — 799
Good 670 — 739
Fair 580 — 669
Poor 300 — 579

3. Keep Your Balances Low

If you have credit accounts that you didn't include in your bankruptcy, or you plan to apply for credit to help you rebuild your credit score, it's crucial that you try to minimize how much debt you take on.

Amounts owed is the second most important factor in your FICO® Score. While the total amount you owe and how much you owe on individual accounts are important, your credit utilization rate is heavily influential.

Your utilization rate is the percentage of available credit on your revolving credit accounts (mainly credit cards) that you're using. So, if you have a credit card with a $500 credit limit and a $100 balance, your utilization rate is 20%.

As you work to rebuild credit, try to avoid borrowing more money than you need. If you plan to use credit cards to build credit, try to keep your utilization rate as low as possible by using your card sparingly or making multiple payments throughout the month.

4. Apply for a Secured Card

With a bankruptcy on your credit reports, your options for new credit accounts will be limited. However, secured credit cards are specifically designed for consumers who are working to rebuild credit.

For the most part, secured cards function the same as traditional unsecured cards. The main difference is that you'll need to put up a security deposit as collateral when opening the account. In most cases, the deposit must be equal to your desired credit limit, often with a minimum of $200 or $300. If you don't pay your bills on time, the card issuer will use your security deposit to pay them.

You can generally get the deposit back when you close your account, but some major card issuers offer to return it sooner if you use the account responsibly—effectively converting your account from a secured card to an unsecured card. As you use the card responsibly, keeping your utilization rate low and paying your bill on time, your efforts will help improve your credit score.

As you compare secured credit cards, keep an eye on fees and deposit rules. Some cards may even offer rewards on your everyday purchases.

5. Consider a Credit-Builder Loan

A credit-builder loan is another solid option for rebuilding credit after bankruptcy. But like secured cards, credit-builder loans work a bit differently than their counterparts, personal loans.

With a credit-builder loan, the lender will hold the funds in an interest-earning account. Then, you'll make monthly payments based on your loan terms—loans often range from $300 to $1,000 (though some go much higher), with repayment terms usually from six to 24 months.

Your payment history is the most influential factor in your FICO® Score, so making on-time payments on a credit-builder loan can make a significant positive impact on your credit. After you make your final payment, the lender will disburse the loan, typically plus any interest earned on the balance, to you.

Because credit-builder loans pose little risk to the lender—if you stop making payments, it simply keeps the loan proceeds minus the principal amount you've already paid—they often offer lower interest rates than comparable personal loans. Annual percentage rates (APRs) are usually under 20% and sometimes even in the single digits.

6. Become an Authorized User

If you have a loved one with good credit, consider asking them to add you as an authorized user on one of their credit card accounts. Once they add you, the full history of the account will be added to your credit reports, which can have an immediate positive impact on your credit score.

If they continue to maintain a low credit utilization rate and on-time payments, your authorized-user status can continue to help build your credit.

As an authorized user, the primary account holder can also opt to give you a card that's linked to the account, which you can use to make purchases. If you do, though, avoid racking up too much debt—ultimately, the primary cardholder is responsible for paying the balance—and be sure to arrange payment for your charges.

7. Get a Cosigner

If you need an auto loan to buy a car or want to build credit in another way, options will likely be expensive. To improve your odds of getting approved for a loan with favorable terms, consider asking a loved one with good credit to cosign your loan application.

If you're approved, you'll be responsible for making payments, but your cosigner essentially agrees to step in and pay off the loan if you can't. As a result, lenders that allow cosigners will consider both credit histories and income profiles to determine your eligibility, interest rate and other terms.

That said, the tradeline will show up on both your and your cosigner's credit reports, so missing a payment affects both of you. Make sure you discuss how cosigning can impact your loved one and make it a priority to pay your bills on time to avoid damaging your relationship.

How Soon Will My Credit Score Improve After Bankruptcy?

Unfortunately, there's no set timeline for how long it takes to recover from bankruptcy. Ultimately, the amount of time it takes will depend on what your credit profile looks like when your bankruptcy is discharged and which steps you take to rebuild your credit.

The good news is that you don't have to wait until your bankruptcy record falls off your credit reports—that's seven years for Chapter 13 bankruptcy and 10 years for Chapter 7—to start seeing progress.

As you develop good credit habits and add more positive information to your credit reports, the negative impact of the bankruptcy will diminish over time. If you're proactive, you may start seeing improvements within the first couple of years.

Continue to Monitor Your Credit Score During the Rebuilding Process

As you work to recover from bankruptcy, both in terms of your credit score and your overall financial well-being, monitoring your credit regularly is crucial. With Experian's free credit monitoring service, you'll get free access to your FICO® Score and Experian credit report, giving you the information you need to track your progress.

You'll also get real-time alerts when changes are made to your credit reports, giving you the ability to stay on top of new developments and make adjustments to your strategy.