How do you rebuild your credit after a bankruptcy? A bankruptcy filing typically needs to stay on your credit report for up to 7 to 10 years. However, it is important to remember that as time goes by the bankruptcy becomes less less important to your overall credit rating. As a result, if you start demonstrating good credit habits shortly after the bankruptcy filing, your chances of being able to get the credit you need at the most favorable interest rates greatly increases.
A quick and relatively easy way to reinstate positive listings on your credit report is apply for and obtain a personal loan from your bank. On the surface that sounds like an insane idea. What bank will loan you money immediately after a bankruptcy? The fact of the matter is that most banks will consider it if you explain your situation and how you are trying to improve your credit and how the bank may benefit.
As quickly after the bankruptcy as possible, take $1,000. and go visit the bank where you have a checking account. Explain to the loan officer that you are attempting to rebuild your credit and that you would like to do this with a personal loan. You can then purchase a $1000 six month CD from the bank and use that as collateral for the loan.
This can be a win-win situation for the bank. They will have a no risk loan that they can earn interest on backed by the sale of one of their own Certificate of Deposit products. It makes sense for them.
Take the $1000 from the loan and open up a savings account. Use that money to pay back the loan. Your credit report will almost instantly show the bank loan which is a good thing. Using the money in the savings account, make sure that you pay back the loan on time each month for the term of the loan. Now you have the benefit of a new account with timely payments showing on your credit report and all it has cost is the interest on the loan.
If you are able to and your cash flow allows, you may want to repeat this process one more time once the loan is paid back. You may also want to ask your loan officer about a secured credit card. If your bank offers that type of service, it can be useful. Make sure that you read the terms and conditions carefully to insure that you understand any fees and limitations of the card. Make sure that is it reported to the credit reporting bureaus as a standard credit card rather than a secured card.
Overcoming a bankruptcy on your credit report can be a challenge but over time and with some responsible behavior, you can gradually improve your FICO score and regain access to the credit you need. This strategy is an easy way to begin rebuilding your credit at a minimal cost.
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