Using credit after bankruptcy is the best way to rebuild credit after bankruptcy. If you do want to join the financial mainstream, opening up lines of credit after bankruptcy discharge and paying them off every month in full is probably the best way to have a great credit score in as little as eighteen months after filing.
Phillip Tirone, the expert who advises most of our clients regarding credit matters after filing, advises them to not be concerned so much about the fact that they have filed bankruptcy. There is no legal way to have it removed from your credit score (just as there is no legal way for your debts to legally return). The good news is that it ultimately doesn’t matter because the credit scoring bureaus are far more concerned with your recent behavior that your past behavior.
The idea then, is to persuade the bureaus to pay more attention to your recent laudable credit behavior than to your pre-bankruptcy behavior. To that end, Tirone advises out clients to open three new credit cards after discharge and one installment loan.
With respect to the credit cards, keep them active by using them only every other month, make only small charges, maybe ten percent of your limit, and pay them off in full every month.
These cards should be taken out pretty quickly after discharge. The credit-scoring bureaus respond best to accounts that have been open for long periods of time. Your future credit score will benefit best if you open the accounts now. So no more moving balances from card to card and no more carrying balances at all.
With respect to the installment loan shortly after discharge, try and avoid taking out a car loan. You are going to get locked into a high interest loan and you are going to add a large balance of debt to your credit report. Far better would be an appliance, tire or furniture loan that can be paid off in six months.
Remember that this is no time to be even one day late on anything, this is your chance to build something new and good. Bankruptcy is truly a fresh start and its value needs to be maximized.
If you want to build up a great score after bankruptcy, you really need to commit to paying your credit bills immediately every single month.
If you need help rebuilding your credit after bankruptcy, please contact me as soon as you can, we offer this service for free to all our Oregon and Washington bankruptcy clients for free so please take advantage of it.