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Rebuilding credit after bankruptcy – the short version
Many people ask me about rebuilding credit after bankruptcy.
After a discharge (elimination) of debts in a Chapter 7 bankruptcy, typically 3-4 months after filing …
• Your debt-to-income ratio is greatly reduced (that's a good thing).
• You will probably be solicited for credit cards, maybe only "secured" ones which make you deposit the amount of money for which you have credit, but also possibly "regular" credit cards. Why? Because they know you can't file another Chapter 7 bankruptcy for eight years and get your debts discharged. These cards will probably cost you a yearly fee; consider that the price of admission.
• Get a credit card and use it for convenience, always paying it off in full before the next billing date.
• Watch out for a new "wrinkle" that's appearing in credit card offers, which is that interest is charged from the date you charge something on the card. That means you don't get any time to pay it off and not pay interest. Pass those cards by and get one that allows you the normal 25 days or so to pay before interest is charged.
This is what I advise my clients to do. Get a credit card, buy groceries or gas, pay it off each month