1. MAKE SURE THE CREDIT BUREAUS ARE DOING THEIR JOB.
The first step in rebuilding credit after your bankruptcy case is discharged is to confirm that the credit bureaus are correctly reporting the status of your pre-bankruptcy debts. Wait about 45 days after your case is discharged and obtain a current copy of your credit report. You can get one actual free copy from the website annualcreditreport.com.
Generally, the bankruptcy will not simply erase the debts. Instead, the debts should be listed, but show that there is no balance due and that the debt was discharged in bankruptcy. Most importantly, there should not be any late payments reported after the date that the bankruptcy case was filed.
If any of your pre-bankruptcy debts are not being reported as stated above, you will need to “dispute” the incorrect entry directly with the individual credit reporting agency that is reporting incorrectly – whether it is Transunion, Equifax, or Experian. You can file the dispute on-line, but I recommend doing in writing through the mail so that you maintain a paper trail. While the dispute resolves the issue in most cases, you can actually sue the credit bureau under the Fair Credit Reporting Act if the situation is not appropriately rectified.
2REBUILD: Obtain new credit.
2. OBTAIN NEW CREDIT AND USE IT RESPONSIBLY
Get a credit card, a store card, or a gas card with a small credit line. The only way to rebuild credit is to have credit, and use it wisely. Start with just ONE card as the cards you will qualify for right after a bankruptcy are the “bad deal” cards with very high interest rates, annual fees etc. Use the card sparingly – for example, put a tank of gas on the card once a month and pay the balance in full each month. As a general rule don’t charge more than 10% of your available credit in a given month.
After you do this for about six months, you will start receiving applications for cards with more reasonable interest rates. Apply for one of these and then cancel your older, higher interest card. Continue this process every three to six months and before you know it, you’ll be receiving offers for the “good” cards with 0% interest for six months etc.
3. EXPECT THE PROCESS TO TAKE SOME TIME.
A bankruptcy case will remain on the “public record” section of your credit reports for up to ten years. This does NOT mean that it will continue to effect your ability to qualify for credit for ten years. Time heals all wounds and as the bankruptcy, and the negative pre-bankruptcy marks get further from the present, they will have far less impact on your credit score.As negative items age, the entries have less impact on your credit score. As a general rule, if you’re following the right steps to rebuild, and depending on your income, you should be able to qualify for a reasonable interest rate on a car loan about a year after your bankruptcy and a mortgage within 2-3 years.