Improving your Credit after a Bankruptcy

One of the keys to qualifying for a mortgage after a bankruptcy is re-establishing credit. Obviously the credit rating takes a huge hit immediately after a bankruptcy.  This is expected.  How long the credit remains damaged depends a lot on how successfully and how quickly you are able to re-establish a good credit rating.  We are going to discuss some ways to get credit re-established so you can move on from the bankruptcy as quickly as possible.

 Chapter 7 bankruptcies often completely wipe out all accounts, which leaves a person with no active credit accounts in their name. Typically, it is difficult to get approved for any new credit immediately after a bankruptcy.  Creditors are hesitant to extend credit.  However, it is important for a person to establish new positive credit to begin the credit healing process.  The score that someone is issued from the credit bureau is largely determined by the recent payment history.  Establishing new positive credit accounts allows the credit score to begin recovering from the massive negative impact of the bankruptcy. 

Opening a secured credit card can be beneficial when other creditors turn you down. A secured credit card requires a deposit.  This deposit offsets any risk to the creditor.  This deposit amount usually matches the credit limit.  I have seen secured credit cards with as little as a $100 deposit.  These secured credit cards are much easier to obtain than an unsecured credit card with no required deposit.  A credit card with a $100 deposit and a $100 credit limit has no risk to the creditor.  By making timely payments on a secured credit card you can quickly register positive credit and get the credit back on track.  Just making even one small charge per month and then paying the balance in full every month will help the credit rating tremendously.  Once credit is completely re-established and it is possible to obtain an unsecured credit card, then the secured credit card can be closed and the deposit would be returned.