Tips to Fix Your Credit After Bankruptcy

Individuals file bankruptcy as a means of debt relief. Oftentimes debt payments become overwhelming and a person's income doesn't allow him to pay off his creditors. To give these persons a fresh start, a judge may grant relief and discharge debts, wherein the person is no longer liable for certain debts. While a bankruptcy can ease the burden of debt, going through this process damages credit scores. It is, however, possible to fix credit after bankruptcy.

Secured Credit Cards

Applying for an unsecured credit card shortly after a bankruptcy to begin rebuilding your credit history may end with a denial letter in the mail. Rather than apply for unsecured credit cards, go to your bank and talk to a representative about secured credit cards. They work the same as other credit cards, the only difference being that the issuer requires a security deposit, setup fee and annual fee. Security deposits are in the $500 range, and your bank will determine your credit limit based on your deposit amount. As you make payments on the secured card, the bank will report your positive payment history to the credit bureaus, which helps fix your credit after bankruptcy.

Bad Credit Loan

Including an installment loan with a secured credit card can also help boost your low score after a bankruptcy. Some lenders will not give you a loan with a recent bankruptcy on your record. The key is locating lenders who specialize in sub prime or bad credit loans. Get an auto loan with a "no credit check" auto dealer, or apply for a small personal loan and use personal property as collateral.

Payment Record

Acquiring a loan after bankruptcy is only the first step to fixing your credit after a bankruptcy discharge. Adding points to your credit score and undoing the effects of a bankruptcy requires making timely payments on these new lines of credit. Late payments or skipping your monthly installment payments has the opposite effect and damages your score further.

Debt Amounts

Huge debts likely paid a role in your bankruptcy. Fixing credit after bankruptcy also entails keeping debt low and only financing items that you can afford. Accumulating excessive new lines of credit equals higher minimum payments each month, and if you are unable to afford these payments you'll start to repeat history and begin missing payments. Pay off your credit card each month to avoid high debts, and review finances before taking out a loan.