My Credit Went Bad After Already Having a Bankruptcy. What Do I Do?

After you get your bankruptcy discharge, you can focus on rebuilding your credit.

After you get your bankruptcy discharge, you can focus on rebuilding your credit.

The credit reporting agency Experian refers to bankruptcy as the single worst thing you can do to your credit. However, even bankruptcy is not the end of the world when it comes to credit. You can recover from the effects of a bankruptcy be being proactive with your credit. Over time, your score should gradually recover.

Get New Credit

It may seem counterintuitive, but one of the best things you can do after bankruptcy has damaged your score is to get new credit. After your bankruptcy, the only thing on your credit report will be the public record of your bankruptcy and a list of delinquent accounts. To help counteract all of this negative information, you have to get some good accounts on your record. You can usually get credit again right after your bankruptcy, although you may face high fees and interest rates. If you can't get a regular credit card, a secured card might be an option. To get a secured card, you must deposit some cash as collateral, usually between $300 and $1,000. After a year or two of responsible use, you can usually qualify for a regular, unsecured credit card on your own.

Make Timely Payments

While bankruptcy may be the single worst thing you could do to your credit score, the single best thing is to make a series of timely payments. The FICO credit-scoring model assigns its greatest weighting to your payment history, at 35 percent of your total score. While it will take time to diminish the effect of your bankruptcy, a consistent history of on-time payments can help your score recover in the first few years after your bankruptcy.

Keep Debt Levels Low

To improve your credit score after bankruptcy, you have to use the new credit that you get. However, this doesn't mean that you should run up the balance on your new card. The amount of debt you owe makes up 30 percent of your FICO credit score, so keeping your debt level low is key to improving your score. Consider the fact that your bankruptcy actually aided this portion of your score by lowering your outstanding debt to zero -- if you immediately run up your debt again, your credit score is likely to plummet once again.

Learn From Your Mistakes

After you file bankruptcy, federal law prohibits you from receiving another bankruptcy discharge for as long as eight years. If you run into credit problems again, you won't have bankruptcy as a safety net and could face lawsuits, wage garnishments and other collection actions. Learning from the behavior that led you to bankruptcy can help protect you from running into the same problems again. If you were living beyond your means, develop a budget and stick to it. You might also consider getting credit counseling. If unforeseen medical or job loss expenses triggered your bankruptcy, focus on getting good insurance and maintaining a large emergency fund for the unexpected.

About the Author

After receiving a Bachelor of Arts in English from UCLA, John Csiszar earned a Certified Financial Planner designation and served 18 years as an investment adviser. Csiszar has served as a technical writer for various financial firms and has extensive experience writing for online publications.

Photo Credits

  • Thinkstock/Comstock/Getty Images