Credit Building
While filing for bankruptcy can help soften significant financial challenges, it may also have lasting effects on your credit. The good news is that, with patience and good financial habits, you can improve your score over time.
By Pamela Kohl
March 31, 2025
Bankruptcy is usually a last resort for those facing financial stress from unexpected life events like medical bills, divorce, job loss, or financial mismanagement. While it can provide some initial relief, bankruptcy can also significantly impact your credit by lowering your score, reducing your credit limit, and making it harder to qualify for certain types of loans and credit cards. But that doesn't mean it has to impact your credit forever. Here are nine strategies you can start using today to improve your credit over time.
Filing for bankruptcy usually leads to a significant decrease in your credit score, anywhere between 100 and 200 points or more, depending on your credit history before filing. Regularly checking your credit scores can help you understand your bankruptcy's impact and alert you to any potential fraud.
Reviewing your credit reports allows you to see how bankruptcy has affected your credit score and identify areas for improvement, like your payment history and credit utilization, which can guide your rebuilding efforts. You can access your credit report from each of the three major bureaus—Equifax, Experian, and TransUnion—once a year for free at AnnualCreditReport.com.
Establishing a consistent payment history is crucial to rebuilding your credit. To boost your credit score, pay your bills on or before their due date to avoid late fees and negative marks. If you have any active credit cards, aim to pay your bill in full each month. If that's not possible, at least make the minimum payment and work on reducing your balance as quickly as you can.
Your credit utilization ratio is the percentage of your available credit that you're currently using. After filing for bankruptcy, keeping this ratio below 30% is especially important. This shows lenders that you can manage your spending, which can help raise your credit score.
If you don't qualify for traditional types of credit, you can use a credit-builder loan to establish a good payment history and earn interest on your savings. With this type of loan, the lender holds a specific amount of money in a secured savings account in your name. You'll then make monthly payments, plus interest, until the loan is fully repaid.
If you need help getting approved for new lines of credit, having a cosigner can also improve your chances for loans or credit cards, especially if they have a strong credit history. By making on-time payments, you can start building your credit history. Just keep in mind that any missed payments will affect both your credit and your cosigner's.
Similar to having a cosigner, being added as an authorized user on a family member's or friend's credit card can help boost your credit. This option allows you to benefit from their credit history without being legally responsible for the debt.
Building an emergency fund can support your credit recovery by providing a safety net for unexpected expenses, which can minimize the need to apply for new credit. Setting aside at least three to six months' worth of living expenses in a high-yield savings account is best, but you can always start with a smaller goal, like $500 to $1,000, and gradually build up from there.
If you have no open lines of credit, this could be a good credit rebuilding option. A secured credit card is a type of credit card that requires you to make a refundable cash deposit upfront. Unlike unsecured cards, where your credit limit depends on your credit history, a secured card's limit is equal to your deposit. For example, if you deposit $100, your credit limit will be $100. These cards often don't require a traditional credit check or a specific credit score for approval, which makes them easier to get.
If a secured credit card sounds like the right choice for you, follow these steps to apply.
Secured credit cards require a cash security deposit upfront, so determining how much you can afford is crucial. If you're unsure how much to put down, consider starting with a smaller deposit, like a hundred dollars. As you build confidence, you can add more to your deposit to increase your credit limit over time.
When selecting the right card, compare deposit requirements, fees, interest rates (APRs), rewards, and potential upgrade paths. To get started, you can contrast features like our secured credit cards.
When choosing between credit cards, it’s best to choose the one that suits your unique needs and budget.
If you're considering a secured credit card with OpenSky, all three of our options offer an 89% approval rate1. Cardholders typically see an average 47-point increase in their credit score within the first six months2.
You can apply for a secured credit card online through the card issuer's website. Be sure to have this information on hand:
Once you're approved, fund your card with your cash security deposit. You might also have to pay additional fees, such as application, processing, or annual fees, so make sure to keep that in mind when you open your account.
There's no set timeline on how long it takes to recover from bankruptcy, as it can vary depending on your credit profile and rebuilding efforts. For example, a Chapter 13 bankruptcy will stay on your credit report for seven years, whereas a Chapter 7 bankruptcy can stay on your credit report for up to ten years. But that doesn't mean you won't start to see your score improve before that. The negative effects will gradually fade if you develop good credit habits and continue adding positive information to your reports.
Pamela Kohl is the Vice President of Marketing at OpenSky. With over 25 years experience in financial services, Pamela has worked closely with banks, alternative finance, and other fintech platforms to develop core banking services, as well as establish new card programs, lending programs, and global payments platforms. She has been nationally recognized for creating innovative solutions, leveraging new markets, and developing winning strategic partnerships. Pamela earned a B.A. from Marshall University, summa cum laude, and M.A. in International Economics from the University of Miami, where she graduated with Distinction.
1 Based on the last 6 months, OpenSky Secured Visa® Credit Card average approval rate is 89.01%. Individual approval results may vary.
2 Based on the first half of 2024, 66% of OpenSky customers increase their score by 47+ points after 6 months.
