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How can you rebuild credit after bankruptcy?

If you’re considering filing for bankruptcy to get out from under a mountain of debt, you may be concerned about your ability to ever get credit again. Chapter 7 bankruptcies stay on your credit reports for 10 years. Alternatively, Chapter 13 filings are reflected for seven years.

With careful planning and diligence, you can take steps to re-establish credit. There are a number of tools for doing that. Following are some examples.

Secured credit cards: When you open a secured credit card, you make a deposit. The amount of money you put in the account is your credit limit. You use the credit card without any risk to the issuer, since your deposit is the collateral. These are a good temporary tool until you can qualify for an unsecured card.

There are multiple secured cards out there. Shop around and find one with a fee you can afford. You also want to make sure that the card issuer reports your activity to the three major credit bureaus.

Credit-builder loan: This is actually a savings account of sorts since the money you “borrow” is held by the lender until you have repaid the full amount. However, your payment activity is reported to credit bureaus, so you have a record of making loan payments responsibly.

Become an authorized signer: If you have family members or other loved ones who have faith in you, they can let you be an authorized signer on one of their credit cards. This will help you rebuild your credit history. The cardholder, however, is the one legally responsible for the debt, even if you made the purchases, so adding someone as an authorized signer is an important demonstration of trust.

Get a co-signer on a loan or credit card: You may be able to qualify for an unsecured loan or credit card if someone with reasonably good credit is willing to be your co-signer. Again, this requires faith on the part of the other person because he or she is responsible for the full amount borrowed or charged if you were fail to repay it.

If you’re considering filing for bankruptcy, an experienced Tennessee bankruptcy attorney can help you determine which type of bankruptcy is best for your circumstances.