How to Rebuild Credit After Bankruptcy

The Rebuild Sequence, Starting the Day You're Discharged

The rebuild sequence has six steps, and each one works on a part of your credit score you can still change. Run them in this order.

1. Pull your credit reports from all three nationwide bureaus the week your discharge order arrives. They are free every week, and you need to see what a lender sees before you apply for anything.
2. Check that every account included in the bankruptcy reads "discharged" with a $0 balance. Dispute any that do not, because Equifax says outdated information can lower your scores more than necessary.
3. Open one secured card or credit-builder loan that reports to all three bureaus. Payment history is the largest FICO factor, at 35 percent of the score.
4. Pay every bill on time, every time. The Consumer Financial Protection Bureau (CFPB) counts a payment as on time only when it reaches the company by the due date, so schedule payments a few days early.
5. Keep each card balance low. Amounts owed is the second-largest FICO factor, and the CFPB cites expert advice to use no more than 30 percent of your total credit limit.
6. Space out new applications. The CFPB says your score may go down if you apply for or open a lot of new accounts in a short time.

If you are in a Chapter 13 plan, every step applies except step 3, which waits until you have consulted your trustee. If your reports already show every discharged account correctly, step 2 is done and you can go straight to step 3.

These steps cannot remove an accurate bankruptcy entry, and no bureau or FICO page publishes a fixed recovery timeline. The entry's weight on your score fades as it ages while your new on-time history builds.

Fixing Your Credit Reports Before You Rebuild Credit After Bankruptcy

You can get all three of your credit reports free every week, and every discharged account on them should read "discharged" with a $0 balance. The Federal Trade Commission (FTC) says the three nationwide bureaus permanently extended free weekly reports, and AnnualCreditReport.com is the only website authorized to fill orders for the free reports. You can also order by phone at 1-877-322-8228.

Experian says accounts included in a bankruptcy should be recorded as "discharged" with the balance at $0 upon discharge. The account history stays, including any late payments from before the filing. On a joint account where only one borrower filed, the other borrower's account keeps displaying its balance normally, according to Experian's guidance for data furnishers.

Read every account line. CFPB examiners reported in December 2024 that weak furnisher accuracy policies led to problems such as continuing to report accounts discharged in bankruptcy. The CFPB's credit report review checklist tells you to confirm that zero balances are recorded for debts discharged in bankruptcy.

Equifax suggests a two-step fix for a wrong balance. Contact the creditor first, then dispute with the bureaus. You can also dispute with the business that reported the account, which generally must investigate and respond within 30 days. If an account is missing its bankruptcy status, Experian asks for the Schedule A document from your filing that lists the account.

Under the Fair Credit Reporting Act (FCRA), a bureau must reinvestigate your dispute free of charge within 30 days of receiving it. That deadline can stretch by up to 15 days if you send relevant information during those 30 days. An item found inaccurate, incomplete or unverifiable must be deleted or corrected, and written results are due within 5 business days after the reinvestigation ends.

The discharge also stops collection on the debts it covers. Under 11 U.S.C. §524, a discharge operates as an injunction against any act to collect a discharged debt as a personal liability, and U.S. Courts calls it a permanent order. If a creditor tries to collect anyway, you can file a motion with the court reporting it.

The CFPB says debt collectors cannot collect on discharged debts, though a lender with a repossession right, such as an auto lender, may still repossess if the debt is unpaid. For student loans discharged by a bankruptcy court, the CFPB has said servicers that keep collecting are likely engaging in an unfair practice. Keep a record of every contact and use our guide on dealing with debt collectors to respond in writing.

Accounts That Rebuild Credit After Bankruptcy

Three account types can help rebuild credit after a bankruptcy: a secured credit card, a credit-builder loan, and authorized-user status on someone else's card.

myFICO says a good practice is to get a secured card and make every payment on time. You put down a deposit equal to your credit limit, and the CFPB warns that fees and interest rates can be high. myFICO says to pick a card that reports to all three major bureaus.

Compare current options in our best secured credit cards roundup. Our comparison of secured vs unsecured credit cards explains how the two card types differ.

A credit-builder loan from a bank or credit union lets you build credit and savings at the same time, because the money is released only after you finish paying. A 2020 CFPB study found these loans worked better for people who entered without existing debt. Taking one out also appeared to reduce borrowers' ability to keep up other loan payments.

Equifax says becoming an authorized user on someone else's card may give a small score increase if the primary owner pays on time. If someone cosigns a loan for you instead, Equifax notes that your late payments hurt the cosigner's credit too.

Some products do not rebuild credit at all. The CFPB lists four:

• Debit cards or cash
• Prepaid cards
• Payday loans, where even on-time repayments might not help
• Buy here, pay here auto loans, unless the lender promises in writing to report on-time payments

What Moves a FICO Score with a Fresh Bankruptcy

Payment history and amounts owed make up 65 percent of a FICO score (35 plus 30), so on-time payments and low balances carry the most weight while you rebuild. FICO's published weights are in the table below, and FICO says the weights may be different for different credit profiles.

On a small secured card, the 30 percent and 10 percent lines leave little room. Say your deposit, and so your limit, is $500. Then 30 percent is $150 and 10 percent is $50, so a $200 balance is over both lines. Pay the card down before the balance climbs that high.

FICO treats a bankruptcy as a very negative event, and filings that include more accounts tend to hurt more. Equifax says scoring models put more weight on the past 24 months, so keeping open accounts in good standing can help scores improve within about two years. Tactics that apply to anyone, such as credit-limit increases and rent reporting, are covered in our guide to building credit fast.

How Long It Takes to Rebuild Credit After Bankruptcy

A Chapter 7 bankruptcy comes off Experian and Equifax reports 10 years after the filing date, and a completed Chapter 13 comes off after 7 years. The score impact lessens as the entry ages. Experian dates the timeline from the month you first filed, and the entry is deleted automatically with no action from you.

The figures in the first two rows come from the bureaus' own pages, including Equifax's reporting periods. The 7-year Chapter 13 period is bureau practice, and the law allows up to 10 years for every chapter under 15 U.S.C. §1681c. The CFPB adds that in certain instances a bankruptcy can be reported beyond 10 years.

Those time limits do not apply to reports used for credit or life insurance of $150,000 or more. They also do not apply to reports for a job paying $75,000 a year or more. Accounts included in the bankruptcy follow their own clock. Experian says they drop off 7 years from the original delinquency date, or 7 years from filing if the account was never late.

Our guide to how long bankruptcy stays on your credit report has the full reporting rules. The drop at filing depends on your whole profile, and myFICO says someone with a score in the mid 700s might see it fall by 100 points or more.

FICO presented a hypothetical illustration in March 2010, hosted by the Federal Reserve Bank of San Francisco. In it, posting a bankruptcy moved a 680 profile to 530 to 550 and a 780 profile to 540 to 560. The same presentation says fewer points are lost for recency as derogatory information ages, assuming no new late payments hit the file. Keep every new account current so that aging keeps working in your favor.

FICO and the bureaus do not publish how long it takes to reach 700 or 800 after Chapter 7, or whether a given file gets there before the entry expires. myFICO says rebuilding can take months or years, and that a bankruptcy may require a longer timeline. For where 700 and 800 fall on the scale, see what counts as a good credit score.

Rebuilding Credit During a Chapter 13 Plan

A Chapter 13 filer can rebuild during the plan, but U.S. Courts' Chapter 13 overview says the debtor may not incur new debt without consulting the trustee. The stated reason is that added debt may compromise completing the plan. A plan runs three years if your income is below the state median and generally five years if above, and never longer than five.

The bankruptcy code gives lenders a reason to care about trustee approval. Under 11 U.S.C. §1305, a lender's claim for a new consumer debt can be disallowed if the trustee's prior approval was not obtained. That applies when the lender knew or should have known that getting approval first was practicable.

The dollar threshold and procedure for new debt vary by district, plan and trustee. One example is the District of New Mexico's local rule, which lets a debtor take on less than $1,000 of non-mortgage consumer debt per calendar year without approval. Above that, the debtor submits a written application to the trustee with amended Schedules I and J.

Courts, trustees and local rules differ, so a bankruptcy attorney, a legal-aid office or a nonprofit credit counselor can apply these rules to your case.

While you wait on the trustee's answer, pull your reports, check that accounts in the plan show their bankruptcy status, and pay existing bills on time. Since February 16, 2018, Experian has shown a blank balance on accounts included in a Chapter 13 petition. Those accounts switch to "discharged" when the plan is complete.

If you are weighing whether the plan can end sooner, see how to get out of Chapter 13 early.

Mistakes and Traps After Bankruptcy

Watch for three traps after a bankruptcy: a reaffirmed debt you still owe, up-front fees for credit, and credit repair companies that promise to remove accurate items.

A reaffirmation is an agreement to stay liable on a debt the discharge would otherwise wipe out, according to U.S. Courts' Chapter 7 overview. It must be signed and filed with the court before the discharge is entered, and a judge must approve it unless an attorney represents you. Treat a reaffirmed payment like any other bill in step 4, since you remain liable for it.

Section 524(c) lets you rescind a reaffirmation before the discharge or within 60 days after the agreement is filed, whichever is later. Section 524(f) separately lets you voluntarily repay any discharged debt.

The FTC has brought cases against scammers who promise a credit card or loan in return for an up-front fee, especially to people with bad credit, no credit or a bankruptcy. The FTC's advice on advance-fee loans is that any fee a lender wants before granting the loan is a cue to walk away. Under the Telemarketing Sales Rule, telemarketers who claim a high success rate cannot collect fees before you are offered credit.

Experian says there is no way to remove an accurate bankruptcy record from a credit report, and goodwill letters are not meant for bankruptcy either. The CFPB says credit repair companies cannot legally get accurate, timely information removed. When they dispute accurate items anyway, those items disappear temporarily during verification and then reappear.

Under the Credit Repair Organizations Act (CROA), a credit repair company cannot charge you before a service is fully performed or make untrue or misleading statements. The FTC's warning signs include a company that insists on payment before helping or tells you not to contact the bureaus directly. You can dispute errors yourself for free, and any credit repair contract must give you a three-day right to cancel.

Car Loan and Mortgage Milestones

A car loan and a mortgage are the larger loans to plan toward.

For a car, a buy here, pay here loan helps your credit only if the lender promises in writing to report on-time payments. Our guide to buying a car after bankruptcy walks through that purchase.

For a home, the FCRA time limits do not apply to a report for credit of $150,000 or more, so that report can include a bankruptcy older than 10 years. See buying a house after bankruptcy for the mortgage side.

Before either application, run your monthly costs through the budget calculator so a new payment fits next to the card you already pay on time. Start this week: pull your three free reports and check that every discharged account shows a $0 balance.

Frequently asked questions