How Do You Rebuild Your Credit After a Bankruptcy?

by Michael H. Schwartz
Man reading his credit score on a tab.

After you file a Chapter 7 or Chapter 13 bankruptcy, you will want to rebuild your credit. It won’t be a sprint. Get ready for a long run – a 5K for some, more of a 10K or marathon for others. However, as you establish new lines of credit, pay your bills on time and take the other steps which we describe below, you should be able to get to the finish line. In other words, one day, your creditworthiness may be as healthy as ever.

What Is a Credit Score?

Man reading his credit score on a tablet.A credit score is your three-digit FICO Score. It is based on a formula that the Fair Isaac Corporation created. It reflects the degree of risk that you present to lenders. In other words, how likely are you to repay your loan or extension of credit on time?

Each of the three major national credit reporting bureaus – Equifax, Experian and TransUnion – use your FICO Score. However, one bureau may have different information. So, it will issue a score that is different from one or both of the other bureaus.

Generally speaking, credit scores fall in the following three ranges:

  • Good – A score of 670-739
  • Fair – A score of 580-669
  • Poor – A score of 579 or lower.

The higher your score, the less risk you pose of defaulting. So, if you have a high score, or a “good” score, lenders will be more likely to give you a loan or extend credit to you at a decent interest rate. On the flip side, if you have a “fair” or “poor” score,” you may not get a loan, and even if you do, it may carry a high interest rate.

How Does Bankruptcy Affect Your Credit Score?

A bankruptcy will show up on your credit report. Ultimately, it will affect your credit score. How long it shows on your report will depend on the type of bankruptcy that you file:

  • If Chapter 7, it will stay on your report for up to 10 years.
  • If Chapter 13, it will be on your report for up to seven years.

Typically, a person’s score will drop by around 160 to 220 points after a bankruptcy. However, your credit report should list all of your discharged debts as “discharged” or “included in bankruptcy.” If you see any errors in your report – for instance, it still lists an account as “past due” – then you can report it to the credit bureau. Go to these sites for more information:

If a past creditor refuses or neglects to update your account status, or if a creditor continues to harass you for a discharged debt, then you should seek help right away from Michael H. Schwartz, P.C. We deal aggressively with creditors when they don’t treat people fair.

Rebuilding Your Credit After Bankruptcy in Five Steps

It won’t be easy to rebuild your credit after you have declared bankruptcy. Still, you should see your score improve if you follow these five basic steps:

1. Carefully plan your budget.

The key to raising your credit score will be to repay your loans on time. To take on new debt and ensure that you can make those timely payments, you will need to know how much you can afford each month. Figure up your income and expenses and see what is possible. The best thing to do is to carefully prepare a realistic monthly budget and stick to it.

2. Build your credit slowly.

After you discharge all of your debts in a Chapter 7 or Chapter 13 bankruptcy, you should not go out and open a bunch of new credit card accounts. If a credit card company extends credit to you, it will probably only be at a high rate, anyways. You could quickly find yourself getting into an unhealthy financial situation, again. Instead, as you develop confidence in your ability to earn enough income, pay your monthly expenses and have a little left over at the end of each month, you may consider starting new lines of credit. For instance, you may want to start with a gas card or retail store card.

3. Watch your debt-to-credit ratio.

A key factor in your FICO Score is your debt-to-credit ratio. This ratio reflects the amount of money that you owe compared to the amount of credit that lenders have given to you. Most personal finance experts suggest that consumers keep their debt-to-credit ratio at 30 percent. In other words, the amount you owe should not exceed 30 percent of your available credit. If you can keep a low debt-to-credit ratio over time, your credit score should gradually improve.

4. Pay your bills on time.

The most important thing that you can do in order to rebuild your credit is to pay all of your bills on time, including any new credit card payments that you acquire. If you are delinquent on a payment, it will harm your credit score. Of course, if you regain your financial health through bankruptcy, and if you follow your planned monthly budget, you should not have difficulty with keeping your accounts “current.”

5. Monitor your credit.

You should keep close watch on your credit score as you move forward. In fact, you have a right to get one free credit report every 12 months from each of the three major credit bureaus. You can order your report by going to or by calling (877) 322-8228. Remember: If you see any error in your credit report, you should report it immediately to the credit bureau.

Get Help from an Experienced White Plains Bankruptcy Attorney

If you have concerns about how bankruptcy might affect your credit score, or if you have other questions about bankruptcy, contact our Westchester county bankruptcy lawyer, Michael H. Schwartz, P.C. We can put more than 40 years of experience on your side and a record that includes not a single denied discharge. Call or reach us online today to schedule a free consultation through our office in White Plains.

Michael H. Schwartz is the largest filer of bankruptcy cases for people living in Westchester and Rockland counties in New York. A graduate of New York Law School, Michael has been licensed to practice in New York State courts since 1983. He is also licensed to practice in the U.S. Bankruptcy and District Courts for the Southern, Eastern and Northern Districts of New York and the District of New Jersey as well as the Second Circuit U.S. Court of Appeals. He is a graduate of Max Gardner’s Bankruptcy and Veterans’ Boot Camps. Several media outlets have reported on his cases or sought his insights, including The New York Times.