Re-establishing Credit

While a bankruptcy may stay on a person's credit report for seven to ten years, a person's credit score can be improved dramatically after a bankruptcy is filed.

I advise my clients to take some very simple steps which will result in a significant improvement in their credit scores within one to two years.

First, shortly after the bankruptcy case is completed, they need to get their credit reports. I recommend www.annualcreditreport.com. This website allows you to obtain one free credit report per year from each of the three major credit reporting agencies: Experian (www.experian.com), Equifax (www.equifax.com), and Transunion (www.transunion.com). You should also get your credit scores. These are not free, but the cost is not great and you'll want a starting point.

Second, upon receiving the reports, examine them and be sure that each report is completely accurate. Every discharged debt must be properly reported or your credit will not be rehabilitated.

Third, obtain a secured credit card www.Bankrate.com is an excellent site for information on such credit cards. The credit card issuer will require you to deposit funds with them in exchange for a line of credit. You will not be rejected which is important because rejection causes a reduction in credit scores.

Fourth, use that secured credit card every month. Just a small amount, such as a tank of gas. Then pay the balance off in full every month. Your payment must be on time. Never be late.

Fifth, after one year, order your credit reports and scores again. You'll be surprised at the increase in the scores and you should again confirm that all the reports are accurate. Do it again over the next year. That's it. It does work. When your scores are good enough, you can apply for other types of credit.