Steps to rebuild your credit after bankruptcy

Your score is immediately impacted once a bankruptcy filing hits your credit report. If you don’t want to wait seven to 10 years to apply for financing or take out loans with outrageous interest, it’s time to take proactive measures.

Here’s what you can do to rebuild your credit and get better rates on loans and credit lines — sooner rather than later.

1. Keep up with payments on existing loans and credit cards

If you still have debts after filing for bankruptcy, now is not the time to ignore them. A derogatory mark on your report doesn’t mean you’re doomed. However, you do need to stay on top of your current obligations and focus on making timely payments on any remaining loans or credit cards.

Your payment history makes up 35 percent of your FICO score, so consistent, on-time payments can help rebuild your credit. Set up reminders or use autopay to ensure you don’t miss any payments.

2. Check your credit reports and consider credit monitoring

You’re typically entitled to one free credit report per year from each major credit bureau: Equifax, Experian and TransUnion. Currently. you can access each of your reports once a week for free from AnnualCreditReport.com. After bankruptcy is a good time to review your reports for accuracy.

If you find errors or inaccuracies, dispute any incorrect information. In some cases, you may even be able to remove old debt from your report. Accurate reports can help improve your credit score over time.

Monitoring your credit report post-bankruptcy allows you to track any inaccuracies or errors that may arise. This ensures your credit information is correct and up to date. It also enables you to observe your progress in rebuilding your credit and promptly address any issues that might arise.

3. Apply for a new line of credit

Adding a new line of credit and making on-time payments can boost your credit score. This can establish a good payment history and increase your total credit limit. A higher credit limit can positively impact your score in some cases.

However, be cautious about hard inquiries. Each time you apply for a line of credit, it could cause your score to go down a few points. Hard inquiries can stay on your credit report for up to two years.

Consider applying for one of the following:

• Credit builder loan

• Secured credit card

• Unsecured credit card with low requirements

The fees with low-credit financing might be high. If you have an annual fee or excessive interest rate, you might consider closing the account later after you’ve had a chance to build your score. Remember that closing accounts can impact your credit score by reducing your credit age and utilization.

4. Become an authorized user on someone else’s account

Becoming an authorized user on someone else’s credit card is a good way to build credit. By using the primary cardholder’s payment history, you can help establish your credit profile. As an authorized user, you get a card with your name linked to their account. While you can make purchases, the primary cardholder is responsible for payments.

This can positively impact your credit report and score, although it has some risks. Fortunately, this process doesn’t usually involve a hard pull on your credit. So, it won’t hurt your credit score unless the original account holder is irresponsible or you spend more than the account holder can help with.

5. Apply for a loan with a co-signer

A well-qualified co-signer can improve your chances of getting approved for a loan. Lenders consider the co-signer’s credit score, which can help secure better terms. This can be especially helpful if you need to buy a car or make another major purchase.

You may be able to find a co-signer by asking a trusted family member or close friend with a strong credit history. It needs to be someone willing to take on the responsibility of your loan. Ensure they understand the commitment involved with co-signing, as they will be equally responsible for the debt if you cannot make payments. So, make sure to make timely payments to protect their credit.

Keep in mind that a co-signer is not the same as a co-borrower.

6. Be cautious about job-hopping

Stable employment can positively affect your loan approval chances. Lenders look for consistent income to ensure you can repay your loans. Frequent job changes or gaps in employment can make you appear riskier to lenders.

If you do switch jobs, try to move seamlessly from one to the next. This will keep the gap closed and show lenders that you’re dependable.