Rebuilding Your Credit after Bankruptcy

Reestablishing a Good Credit Rating after a Chapter 7 or Chapter 13 Filing

When you seek protection from creditors through Chapter 7 or Chapter 13, your credit score is going to take a hit—it simply can’t be avoided. But that doesn’t mean that you’ll have to spend the rest of your life paying cash for everything. Though it can take some time, and usually requires hard work and attention to detail, you can boost your credit rating back up, so that potential lenders will consider you risk-worthy. Here’s how.

Try to Secure Some Level of the Most Common Types of Debt

This will likely be a challenge at first, but remember that many of the payments you make every month get reported to credit agency. As you consistently pay your obligations in a timely manner, your score will start to go back up. An important part of your strategy, though, should be to secure a mix of the common types of credit. Lenders like to see that you have developed the skills to effectively manage all the debt of your household. So keeping your commitments on a credit card, an auto loan, a mortgage (if possible) and maybe some type of consumer credit can show just such an ability.

Don’t Overextend Your Credit Cards

If you are able to get a credit card, follow these steps:

• Never leave more than 30% of your balance unpaid—This is one of the first warning signs of financial trouble. Furthermore, the higher your credit card balances, the more you’ll need to pay every month and the less discretionary income you’ll have.
• Try to get a larger credit amount—Showing potential creditors that you can manage a very small amount of credit won’t instill much confidence. Your credit score will improve more quickly if you get a higher credit limit, but never leave more than 30% of the balance unpaid.
• Don’t pay off your credit card every month—You’ll reestablish your credit quicker if you leave about 10-25% unpaid every month.

Contact Attorney Howard N. Sobel

At the office of Howard N. Sobel, we provide personal bankruptcy counsel to men and women throughout the state of New Jersey. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.

Named a New Jersey SuperLawyer Every Year since 2008, Including 2023