Re-establishing Credit After Bankruptcy

Written by Anza Goodbar (last updated November 22, 2011)

In order to re-establish your credit, you need to understand what comprises your credit score. Your credit score is broken down into five categories. Each is weighted with a certain percentage of the total.

Your Payment History carries the most weight with 35% of the total score. When rebuilding your credit, the best place to start is by making all of your payments on time. Making on time payments actually increases your score whereas late payments and bankruptcies lower the score.

How Much You Owe is the next weightiest part of the score with 30% of the total. This is comprised of how much credit you have available to you and how much you have used. This one is tricky. You can actually decrease your score if you are maxed out on available credit, even if you are making on time payments. If at all possible, never use more than 50% of available credit and pay off balanced each month. Creditors want to know you can use credit responsibly.

Length of Credit History holds 15% of the total value of your credit rating. The length of time you have an account in good standing can increase your score. However, if you manage your credit wisely, you can have a good score with a short credit history.

Credit Mix accounts for 10% of the overall rating. It is important to have a mix of different kinds of credit accounts like a mortgage or loan a revolving credit like a credit card.

And finally, New Credit also has a low weight with 10% of the total score. Applying for new credit can bring down your score. Before you apply for a credit card, car loan or mortgage, shop rate before you allow anyone to pull a credit report. Try to keep the amount of time your credit is pulled to a minimum. While the score may only drop 2-5 point, these can be valuable points when you are re-establishing a good credit rating.

After a bankruptcy, it is common for high interest rate credit card services to contact you. Beware of taking their offer. It is better to get a secured credit card with a national bank like US Bank or Wells Fargo. Your credit limit is based on a dollar amount that is secured by a savings account. You can increase your credit limit by depositing more money into the savings account. Treat it as a regular credit card, do not use more than 50% of your available balance and try to pay off the balance each month. Think of using it for items that you might otherwise pay cash for like gas and groceries. Set a budget for these items and set the money aside to pay the bill at the end of the month. After six months to a year, your deposit will be applied to your balance and the card will convert to a regular unsecured credit card.

Resource Links

Author Bio

Anza Goodbar

Anza is a single mother of four who makes her home in Colorado. She enjoys writing, hiking and is an avid football and hockey fan. She is the owner of a virtual business services company; writing is just one of the many services her company offers. ...


Choosing a Plastic Surgery Clinic

When seeking a plastic surgery clinic it is important to seek proper certifications. It is a good idea to ask to speak to ...

Discover More

Candied Sweet Potatoes

Sweet potatoes can be boring. Jazz them up for the holidays or special occasions by adding bourbon and orange juice.

Discover More

Fantastic French Toast

Filled French toast is an easy variation on an everyday favorite. Take a few minutes extra to make breakfast memorable.

Discover More
More Money Tips

Recognizing Credit Counseling Scams

Credit counseling is a useful credit tool that can get you well on your way to a stable financial score, however you do ...

Discover More

How to Re-Establish Your Credit

There are a lot of reasons why you would want to re-establish your credit. It could be that you just got out of a ...

Discover More

Does Co-Signing Affect Your Credit?

Co-signing on a loan could be a nice gesture to help someone get on their feet after a bankruptcy or hard luck. It could, ...

Discover More

If you would like to add an image to your comment (not an avatar, but an image to help in making the point of your comment), include the characters [{fig}] (all 7 characters, in the sequence shown) in your comment text. You’ll be prompted to upload your image when you submit the comment. Maximum image size is 6Mpixels. Images larger than 600px wide or 1000px tall will be reduced. Up to three images may be included in a comment. All images are subject to review. Commenting privileges may be curtailed if inappropriate images are posted.

What is 7 - 1?

There are currently no comments for this tip. (Be the first to leave your comment—just use the simple form above!)