by Chris A Smith

How do you build credit after a bankruptcy? A bankruptcy filing will stay on your credit report for 7 to 10 years but it is important to remember that it becomes less important to your overall credit rating as time goes by. As a result, if you demonstrate good credit habits, and demonstrate them early after the filing, your chances of getting the credit you need at rates you can afford greatly increase.

A Fast and relatively easy way to post positive items on your credit report is to obtain a personal loan from your bank. On the surface that sounds like a crazy idea. What bank is going to loan you money just after a bankruptcy. The answer is “most banks” providing you explain what you are trying to do and how the bank is going to benefit.

As soon after the bankruptcy as you can accumulate $1,000, go visit the bank where your checking account is. Explain to the loan officer that you are trying to start rebuilding your credit and you would like to do this through a personal loan. Further explain that you would like to purchase a $1,000 six month CD from the bank and pledge that as collateral for the loan.

What you have just proposed is a no risk $1000 personal loan that the bank will earn interest on. In addition, the bank sells a $1000 Certificate of Deposit. If banks were offered these kind of deals all the time, we wouldn’t have to send tax dollars to bail them out.

What you get is an almost immediate posting of a loan on your credit report, and providing you make your payments on time, an immediate demonstration that your credit management is pointing in the right direction. Take the $1,000 from the loan and open a savings account. Use this money to pay back the loan. You will be out the cost of the loan interest but that will be offset somewhat by the interest on the CD and the savings account.

At the end of the loan you may want to consider repeating the process. At the very least ask your banker to make a recommendation for a secured credit card. If his bank provides that service make sure you can afford the fees and make sure the bank reports it as a standard credit card and not a secured card.

These are small but necessary steps in rebuilding your credit after a bankruptcy. You’ll discover, providing you pay your bills on time, that your FICO score will improve dramatically over the first 9 months as it projects your behavior based on a responsible history, not just the bankruptcy.

About the Author:
Chris A Smith reports on consumer credit items like stopping harassing collectors, internet scams personal finance and credit card law. Check out his best articles on bankruptcy, credit repair and more.