Although a Chapter 7 bankruptcy discharge can be a great relief, you may finish your bankruptcy wondering what to do next. Maybe you gave up your car or your house in your Chapter 7 and need to get an apartment or buy a new vehicle, or maybe you know you'll need a new vehicle in the near future. Bankruptcy stays on your credit report for 10 years, and it's difficult to get credit when your credit score is low; however, you can improve your credit score before that 10 years is up by getting new credit and using it responsibly.
Instructions
1. Obtain a copy of your bankruptcy discharge. After you file your Chapter 7 case, make sure to follow your attorney's instructions, as well as the court's and the trustee's. If you have a typical Chapter 7 case, you should receive your discharge about two to three months after your creditors meeting. Your discharge order will help you as you try to obtain new credit after your bankruptcy.
2. Obtain a manageable level of new credit. You were in bankruptcy because you were in over your head when it came to your debt, so getting new debt after a bankruptcy may seem counter-intuitive. However, you need to obtain credit to improve your credit rating. Some banks will issue high-interest credit cards or car loans to individuals just out of bankruptcy, as long as they have a discharge order. By obtaining new credit, you can start to rebuild your credit score. Don't obtain too much credit; if you borrow too much and get in over your head again, you're no better off than you were when you filed bankruptcy. And too much debt will sink your score even lower. Just one credit card with a low, manageable credit limit is enough to start rebuilding your credit.
3. Use your new credit responsibly. If you get a new credit card, only charge what you can afford to repay at the end of each month. The reason you would get the card is solely to rebuild your credit, not to buy things you can't afford. If you get a car loan, buy a used car with affordable payments. You need the car for transportation, and it can also help you rebuild your credit, but you don't need a status symbol or a gas guzzler.
4. Make your debt payments on time, every time. Whether you're making payments on a car note or a mortgage that you reaffirmed in your Chapter 7 or on the new debt you incurred to rebuild your credit, making your payments on time is key to improving your credit rating. As time passes and you continue to make your payments on time, your credit score will go up, as long as you keep your balances manageable.
5. Avoid the new credit card offers you receive after your bankruptcy. As strange as it may seem, after a Chapter 7 case, many people are inundated with pre-approved credit card offers. Obtain one card to rebuild your credit. Throw the others away to avoid overextending yourself. Make sure the credit card you choose is issued through a reputable bank and has the best interest rate, and watch out for annual fees.
6. Avoid credit repair scams. You may receive offers from private companies promising to help you repair your credit by removing your bankruptcy from your credit report or changing negative information. They may ask for fees up front or tell you that you can't repair your credit alone. These companies are not legitimate. No one can legally remove negative information from your credit report if the information is correct, and you can repair your credit yourself.
7. Monitor your credit report. As time passes, you will need to make sure your credit report stays accurate. You're entitled to a free report every year from each credit reporting agency--Equifax, Experian and TransUnion. Check your report every year and make sure the balances due, account statuses and payment amounts are accurate. Report any inaccurate information to the credit reporting agency, and the agency will investigate it and correct it.
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