It is no secret that bankruptcy deals a massive blow to your credit history. Following bankruptcy, you will need to work harder to establish new credit, and maintain the credit properly. While bankruptcy sets the stage for a fresh financial start, it does not make the process of rebuilding a strong credit history easy. By taking the right steps, you can find yourself in good credit range within a year of bankruptcy.
- Look back at what caused your credit issues. Was your situation caused by forces beyond your control like an illness or layoff? Did you neglect your bills? Were you able to handle your finances before a crisis happened? Have you learned how to handle your finances? Rebuilding credit after bankruptcy is only as good as your ability to handle the credit you receive.
- Get a secured credit card as soon as your bankruptcy is discharged. You must start to add positive credit to your credit history. Contact your local bank or credit union to see if a secured card is offered. Make sure the lender reports to all three credit bureaus -- Experian, Equifax and TransUnion. If your bank doesn't offer a secured card, ask if the bank offers a secured personal loan option where you can deposit money into a savings account as collateral.
- Keep the balance on the secured credit card low. Your goal is to build credit, not to charge up your credit cards. A balance between 1 percent and 20 percent of your credit limit is ideal. It doesn't matter whether your credit limit is $300 or $1,000, by keeping the balance low and making all payments on time, your credit score will go up after six months.
- Wait six full months before applying for a store credit card. Whenever you apply for new credit, your credit score takes a hit, but after six months, the score will recover and go higher than before, especially if you have handled the account well by keeping the balance low and making the payments on time.
- Apply for the department store credit card seven to 12 months after opening the secured credit card. The potential lender will now see you have held another credit account and managed it well. Your starting balance will likely be low, but with proper handling, your account limits should rise.
Resist the urge to apply for multiple store credit cards. Each time you apply for credit, your credit score drops a few points. Multiple credit inquiries also look bad to potential lenders as it appears you are desperate for credit.