Filing for chapter 7 bankruptcy leads to a lower credit score. Worse still, it can be seen by creditors for a period of 10-years. Getting approval for mortgages and home loans after bankruptcy discharge may seem like an insurmountable obstacle for the foreseeable future, but this isn’t the case. Although there are new rules to adhere to and the cost of borrowing will be higher, post bankruptcy credit can be attained with relative ease. Better yet, provided that future debt and credit obligations are met punctually, interest rates will start to come down within a few years.
Correct Errors for Home Loans After Bankruptcy Discharge
Request a free credit report from Experian, Equifax and TransUnion and check the information provided by each credit reference agency for mistakes. It is important to remove any debts that were included as part of the bankruptcy agreement when they still show as active. These can be corrected personally or with the assistance of a credit repair attorney. The appropriate supporting documentation must be supplied. Allow several months for a credit report to reflect any amendments.
Secured Revolving Debt for Post Bankruptcy Credit
If all debt was written-off, a secured credit card can help to rebuild a credit history. It involves putting up property or cash to secure the debt. When the customer settles the balance on-time, the creditor will report to credit reference agencies at month end. Liz Pulliam Weston of MSN Money stated: “Keeping your credit use to less than 30% of your credit limits (10% is better) will help you get the best possible credit scores — and should help keep you from getting over your head in debt, as well.”
Qualifying for Loans After Bankruptcy Discharge
As well as a source of revolving debt, it is also necessary to make repayments on a form of instalment debt. It won’t be possible to get this type of post bankruptcy credit straight away. In order to get home loans after bankruptcy discharge, a couple of years of timely repayments will need to have been made on other debts. Pawn shop and payday loan lenders will offer finance, but they don’t report to credit reference agencies. A credit union may be prepared to offer a loan, but not straight away.
Pay Punctually to Get a Mortgage Loan After Bankruptcy
There are no short cuts when it comes to getting a better credit score. In order to qualify for home loans after bankruptcy discharge, it is necessary to pay back debt punctually for a period of 24 to 36 months. Each timely repayment leads to a credit rating improvement; miss a payment and the repair process will need to start from scratch. Rebuilding credit can be more difficult to achieve when all debts were eliminated as part of a bankruptcy agreement.
Bankruptcy and Credit Approval
Although filing chapter 7 causes a score to plummet, it remains possible to get an improved credit rating and qualify for home loans after bankruptcy discharge. It is important to take steps to ensure that the information held by credit reference agencies is accurate. Make debt payments punctually and establish new forms of credit to aid the rebuilding process.