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While it is true that bankruptcy can deal a serious set back to your credit standing it is by no means the end of the credit line. With the competitive lending market that we live in, credit companies will start soliciting you the day after you leave your bankruptcy hearing. In fact, most people can get a mortgage and credit soon after bankruptcy but not all of it is good to have. Some offer credit at a high interest rate or with high annual fees which are not necessarily the best option for people trying to rebuild their credit because of the expenditure. Your best recourse is to open a savings account and have it linked to a secured credit card this would allow you to rebuild your credit while at the same time hold a certain amount of money in a savings account for a time period. This type of credit typically charges less interest and helps you to establish credit by having a steady amount of money in a savings account. It is a good idea to keep track of your credit score and make corrections if necessary. You should also send letters to the credit reporting agencies explaining the reasons for your bankruptcy.
Do you or someone you know need a mortgage after bankruptcy? Contact an attorney that can help you reestablish your credit and help you get a mortgage after bankruptcy!
Some tips to help you reestablish your credit:
• Correct any errors in your credit report.
• Write letters to the credit reporting agencies explaining your bankruptcy filing.
• Talk to your banker to let them know you are trying to restore your credit.
• Open a savings account and contribute to it habitually.
• Try to pay any outstanding debt as fast as possible.
• Pay your regular household and other bills on time.
• Pay your reaffirmed, pre-bankruptcy debts on time.
• Take out a small loan or a secured credit card with small limit.
• Stay away from high interest credit traps such as payday loans.
• Do not apply for multiple credit cards or open credit.
• Try not to increase your debt to income ratio.
According to the Bankruptcy Code and the Fair Credit Reporting Act, a consumer credit report may include information on Chapter 7 and 13 bankruptcies for 10 years from the start of the case. One major consumer credit reporting agency eliminates the data on Chapter 13 after seven years though it legally is not required to do so. Other credit information is usually reported for seven years. Even though many people are eligible for a mortgage with a good rate even before their bankruptcy is removed from their credit report. If you take care to rebuild your credit and wait a short period of time, your mortgage should be comparable to what you could have gotten before you filled for bankruptcy. Typically in 18-24 months after you would be eligible for a mortgage, of course, the longer you wait the better your rate would be. Some people do become eligible after 12 months. With a bankruptcy on your record, lenders usually place more emphasis on the amount of your down payment and the verification of stable income than they would have with other borrowers. You will even be eligible for FHA and VA guaranteed loans after two years, provided you keep your current credit in good standing. After the two year waiting period is over, you should be able to get financing easily. If you need to get a mortgage before the waiting period is over you will need to have an impeccable payment history since your bankruptcy and you will most likely be expected to give a higher down payment.
Many lenders are willing to pre-approve you for up to 28% of your pretax income, but try not to stretch yourself too thin after this point. It is more advisable to try to find a home where you only have to pay 20% of your pretax income or wait till your financial situation is more solid. Once you have been pre-approved you should give yourself a 15-20% cushion form you pre-approved total incase of unforeseen financial hardship. If you qualify try to get a FHA or VA loan that require a lower down payment and FHA is known for being more lenient when it comes to bankruptcies.
Do you or someone you know need a mortgage after bankruptcy? Contact an attorney that can help you reestablish your credit and help you get a mortgage after bankruptcy!
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