After a discharge from bankruptcy, you may be hesitant to take out new lines of credit – taking on too much debt may have created the need to file for bankruptcy in the first place! However, one of the best ways to bounce back from bankruptcy is to take out new credit that you can comfortably afford. Here’s why.


Many bankrupt borrowers make the mistake of avoiding credit altogether after their bankruptcy is canceled. The reluctance to borrow again is understandable, but to prove that you’re a worthy borrower, you need to add a positive payment history to your credit reports to get yourself back on track.

Choosing to never take on new credit after bankruptcy can lead to a thin credit history and low credit rating, even after the bankruptcy has been removed from your credit reports. Unless you are working on building your credit score it can stagnate and create problems later if you end up needing credit in the future, like a car loan or mortgage.


Once your bankruptcy is over, your credit score may not be that good. This is typical. To declare bankruptcy is to admit that you cannot repay the debt that you have incurred, whether due to circumstances that you could not control or not. Lenders may be wary of approving you for new credit once they see that you have filed for bankruptcy in the past, especially traditional lenders such as banks and credit unions.

It is not always easy to get credit if your credit rating is bad. It’s like being stuck between a rock and a hard place – many lenders require you to have good credit before you can take on more debt.

However, the whole point of filing for bankruptcy is to deal with the debt you couldn’t handle and then come out with a clean slate. This process is not without consequences, such as damage to credit, but there are ways to go back. If you want to prove your creditworthiness after bankruptcy, building a good payment history with a low-risk line of credit and working with the right lenders is a good place to start.


BankruptcyHQ doesn’t stay on your credit reports forever. If you have filed Chapter 7, it takes up to 10 years from the date of your filing for it to fall; Chapter 13 bankruptcy takes seven years to be removed. With each passing year, filing for bankruptcy has less and less of an impact on your credit score.

While time can heal your credit reports, one of the best ways to actually improve your credit score after bankruptcy is to work with the right lenders for your credit situation. There are also several low risk credit tactics you can use.

Here are three things you can try to build your credit when you come out of bankruptcy:

  • Get a secured credit card – Secured credit cards are secured by a deposit you make. If you become unable to pay your balance on the card, your deposit covers the balance. Since this form of revolving credit is secured with your own money, it is considered low risk credit that many borrowers with bad credit can claim. Consider applying for a secure credit card, then using it for everyday purchases like gas and groceries, and paying it off monthly to start a good payment history.
  • Make sure your positive payments are reported – If you are already paying rent, utilities, and / or streaming services, consider using a credit reporting service that can help you report these payments to the credit bureaus. Experience boost is a good example of this type of service. Many things you may already be paying for are not automatically reported. Therefore, listing these accounts on your credit reports could be a good way to get a payment history without having to take on new credit.
  • Take out a subprime auto loan – Subprime lenders are registered with special financing dealers. They specialize in assisting borrowers with bad credit, such as bankruptcy. Once you’ve been released from bankruptcy, subprime lenders are often willing to work with you to secure a vehicle. Subprime auto loans almost always get flagged, so your timely car payments can get you back into the credit world and establish a good payment history if you manage the loan well. Here are some typical sub-prime financing requirements.

While these tactics are a good place to start, remember that your payment history is the most important factor in determining your credit score. It represents 35% of your credit score, so a missed payment can create a big drop in points, and it can last up to seven years. Make sure you keep control of your finances to avoid further credit damage.


Whether you’re looking for a vehicle, a house, or a personal loan, a good way to prove your ability to repay credit as a bankrupt borrower is to make a down payment.

Down payments can increase your chances of getting approved for new credit because they show your willingness to invest in your own success since you put some of your own skin in the game. Auto lenders usually require bad credit and bankruptcy borrowers to put in at least 1,000 $ or 10% of the vehicle’s selling price.

Since bankruptcy can damage your credit reports, having money to deposit can signal a lender that you are ready to move on and that you are ready and able to pay off new credit.


Not all lenders are able to help bankrupt borrowers. Often times, traditional auto lenders may not be keen to be the first lender to provide financing to a borrower who has recently been released from bankruptcy. However, subprime lenders often work in these circumstances.

AT Auto Express Credit, we want to help you find the auto finance resources you need to get back into the lending world with auto credit. Using our nationwide dealer network, we’ll find a local dealer in your area who has signed up with subprime lenders. Start by filling out our free auto loan application form.

Janet E. Fishburn