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How to rebuild credit after bankruptcy

Filed (or thinking of filing) for bankruptcy? Your financial life isn't over. Here's how to get back on track.

By MSN Money Partner May 31, 2013 1:36PM

This post comes from Angela Colley at partner site Money Talks News. 

MoneyTalksNews logoAbout 1.2 million Americans filed for bankruptcy in 2012. If you were one of them, you've likely heard that bankruptcy will stay on your credit reports for 10 years.

You might be assuming your life is over -- at least financially -- for the next decade. But you'd be wrong.

Bankruptcy does do major damage to your credit scores, but you can take action right now to turn things around and rebuild your credit. 

1. Order your credit reports

Your first step after finalizing your bankruptcy is to order your credit report from the three major credit bureaus. By law, you're entitled to one free credit report a year from each bureau, which you can get online at

Check your reports and make sure every debt included in your bankruptcy is listed that way on your credit report. Check for errors -- things like accounts that aren't yours and closed accounts showing an open status. If you find mistakes, dispute them with the credit bureaus.

You can file disputes online here:

2. Get new credit

Once your credit reports are squared away, it's time to get new credit.

Many people shy away from credit cards after bankruptcy, fearing they won't get approved or they won't be able to manage the credit line, but having credit is an important way to start rebuilding your credit scores.

Start with a secured credit card. Because you put down a deposit for a secured card, most people get approved, and your credit line will equal your deposit. Here are some to consider:

  • Orchard Bank Classic Card -- $200 minimum security deposit, no annual fee the first year, and a $35 annual fee thereafter.
  • Wells Fargo Secured Visa -- $300 minimum security deposit and a $25 annual fee. Must be out of bankruptcy for one year to get approved.
  • U.S. Bank Secured Visa -- This bank actually places your security deposit in an interest-earning savings account. There’s a $35 annual fee and a $300 minimum security deposit requirement.

Calculator © Best View Stock, Best View Stock, Getty Images3. Pay your bills on time

Your payment history makes up 35% of your credit score. Always make sure you pay your bills by the due date each month to start racking up good credit. Pay early to make sure your payment arrives on time.

Also, charge no more than 30% of your credit limit. Some experts advise that you keep your charges at no more than 10%. And aim to always pay off the balance each month. This will keep you from taking on more debt than you can afford to repay.

4. Start an emergency fund

Now that you've established some credit, start building up some cash reserves to cover emergencies.

Many experts suggest you have three to six months' worth of expenses saved in your emergency account. It's a daunting figure, but I've done it. I figured out how much I'd need and then set up an automatic transfer of 5% of my paycheck into my savings account. To boost my savings, I cut down on some expenses like cable TV and my gym membership. I also had a garage sale and sold higher-end items on eBay and Craigslist.

You don't have to do it my way, but start saving. With an emergency fund in place, you won't have to take on a loan or a line of credit to cover an unexpected life event.

5. Turn your mistakes into life lessons

Old money mistakes don't make you a loser; they make you human. Everyone makes mistakes from time to time. The trick is to learn from them.

Identify where you went wrong with your personal finances and aim to do better now that you're rebuilding your financial life. For example, if you had a hard time paying your bills on time, set up reminders on your smartphone or computer so you won't miss another due date. If you simply took on too much debt, give yourself a set limit you can spend each month, track your spending and don't go over.

Whatever your mistakes were, they were just that --  mistakes. You've got another shot to do things differently now.

More on Money Talks News:
Jun 4, 2013 6:29PM
I used a service called Free Score to get my credit scores for $1 ( ).. this gives you a good idea of where you stand.. paying down debt to lower interest payments is key.. I'll have to start tracking my spending next
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