Post-Bankruptcy Credit

After receiving a discharge in bankruptcy, creditors whose debts are discharged are required to report that the account has a zero balance. The fact of the filing itself can remain on the credit report for 10 years from the date it was filed. A debtor interested in re-establishing credit after bankruptcy should obtain credit reports from the three largest credit reporting agencies (Experian, Equifax, and Trans Union), and ensure that the account balances have all been zeroed out. If they have not, the debtor should contact the credit reporting agencies and ask that the record be corrected.

Methods of Re-Establishing Credit

A debtor seeking to re-establish credit should consider applying for a secured card, usually a Visa or Master Card. This is a credit card issued by a bank where the customer is required to establish a savings account at the bank, which is used as security or collateral for the credit line. Typically, the limit on the card is based on the amount of collateral deposited in the savings account. Often, the bank will have an annual fee. The benefit of the secured cards is that banks will issue them to persons who have poor credit history, but are able to pay the deposit to secure the account.

Other methods include buying a car from a local auto dealer who specializes in securing car loans for people with bad credit or recent bankruptcies. Also, a debtor with a personal relationship with someone at a local bank should not hesitate to seek assistance from that source.

Caution in Rebuilding Credit

Debtors emerging from bankruptcy should use their experience to avoid getting into the same financial traps that snared them before. Often, the easy availability of unsecured credit in the form of unsolicited, pre-approved credit cards was the start of financial downfall. Debtors should take steps to budget properly, spend within their means, and resist the temptation to incur debt beyond their reasonable ability to repay (under the pretense of their wish to re-establish credit). Debtors should avoid being enticed by so-called "credit repair" agencies. These are often simply unregulated rip-offs who prey on the financially distressed, and who do nothing more than what debtors themselves can do by exercising their legal rights to obtain reports that properly list their outstanding obligations.