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I practiced bankruptcy law for a decade and one of the biggest concerns potential new clients had was whether they would be able to get credit again after the bankruptcy was over. I assured them that within a year, two at most, they could have fine credit again. Here is how they did it, and how you can too (and no, it does not require taking out a hardship loan.)

Start with a secured credit card

A secured credit card is one of the most reliable tools for anyone looking to rebuild credit. These cards work similarly to regular credit cards but require a deposit, usually equal to your credit limit. For example, a $300 deposit would give you a $300 credit limit, so you can use the card to make purchases up to $300. The deposit both protects the lender and also helps you avoid overspending.

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The reason these work to rebuild your credit is that secured credit cards are reported to the major credit bureaus. By making small purchases, ideally paying off the balance every month, and of course paying on time, you will begin to create a new, positive payment history. Within a year or so, you will likely be able to transition to an unsecured card, boosting your scores even further.

Take out an auto loan

There are many used car dealers who will be more than happy to work with you to get a car loan after your bankruptcy has been discharged. Moreover, credit unions and auto finance companies will also work with individuals recovering from bankruptcy. So, whether you need a new car or not, this is a very viable option.

Is there a catch? Of course! The catch is that the interest rates will be quite high. But if you shop wisely, find an affordable car, and are willing to pay 20% or more in interest, a car and a loan arranged by a dealership can be yours immediately post-bankruptcy.

In the alternative, it might behoove you to consider shopping around for an auto loan offered by a personal lender — and make your payments on time.

Either way, by making consistent, on-time payments, an auto loan shows that you are capable of managing larger debts responsibly. Additionally, if you begin to create a mix of new credit types — both auto loans and revolving secured card credit — you can really start improving your credit score.

Become an authorized user on a trusted account

This is a cool trick. If a close family member or friend has a solid credit history, see if they would be willing to add you as an “authorized user” on one of their accounts or credit cards. This can be a big game-changer. When you are an authorized user, the primary cardholder’s positive payment history will reflect positively on your credit report. This will definitely improve your credit score, thereby enabling you to get better credit terms on your own.

Of course, the key is to keep the account in good standing, avoiding late payments or high balances. Not only would this hurt your credit, but so too would it negatively impact your friend’s credit score, and your relationship.

Getting back on your feet financially after bankruptcy is doable, but it requires patience, consistency, and smart decision-making. And while it may take time, remember that every new account and on-time payment brings you closer to a fresh financial start.

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