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How long does it take to establish credit

how long does it take to establish credit

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Right After Discharge

According to, credit is available to people who have recently been discharged in bankruptcy court. In some cases, those people are more attractive to lenders because they no longer have debts to pay. recommends that those who have been discharged in a bankruptcy case wait about six months before attempting to get a credit card. But the offers will likely come sooner than that.

A Good First Step

Liz Pulliam Weston, a financial expert who writes for, recommends a secured credit card as a first step toward re-establishing your credit after bankruptcy. A secured card involves making a payment to the card company, which in turns becomes your credit limit. In some cases, you may apply for an unsecured card, but a secured card offers less risk because you cannot spend more than the limit. Seek cards that have no application fee, reasonable annual fees and report to all three credit bureaus.

Using That Credit

Weston writes that it is more important how you use that credit than whether you actually get it. First, don't max out the card, as it can hurt your credit score. Try not to charge more than 30 percent of your limit. Second, pay the card in full each month. She writes that it's a myth that carrying a balance is good for a credit score. Credit scores don't distinguish between carried balances and balances paid each

month. Paying the bill each month will establish good spending habits. Expect to keep that secured card for 12 to 18 months before converting to an unsecured card.

Get An Installment Loan

This will likely be trickier than getting a new credit card. If you carry over loans such as home loans, car loans or student loans from the bankruptcy, those can be used to boost your credit score. Weston writes that it's possible to qualify for a high-rate mortgage loan after six months, but unlikely. She recommends waiting at least two years from your bankruptcy discharge and seeking an FHA loan. Auto loans are another way to do this, but expect to pay high interest charges initially. After a year, if you've paid on time each month, you can likely convert to a lower rate loan. Weston recommends trying to put down a big down payment and to avoid loans with prepayment penalties.

Other Ways experts report that opening a certificate of deposit account, or CD, at your local bank can help your credit. They recommend taking out a small personal loan and then applying that money toward a CD. Between opening the CD and its maturation, take care to pay back the loan each month. If it's your bank, use automatic payments from your account to guarantee on-time payment. When the CD matures, you've not only made a little money, but you've also worked to put together a positive credit history.

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