Once upon a time, a bankruptcy or foreclosure carried a massive negative stigma that attached to a credit background for between seven and 10 years. Since the mid-1990s, that stigma has lessened, aided by the problems in the domestic economy and home market during the late 2000s. Bankruptcy and foreclosure are very regrettable approaches to acquire a financial fresh start. When used for this purpose, a home buyer can qualify for a competitive mortgage in as little as two years after a bankruptcy, and three years after a foreclosure.
Check your own credit report after bankruptcy discharge to be certain it is accurate and that all debts have been discharged and closed. Some lenders may continue to report open and collections accounts in default, which will continue to hamper your score.
Ensure that official documents, such as property deeds, court foreclosure activities, property tax records and your credit file, accurately record your foreclosure date. Lenders will count three years ahead of the date before approving your mortgage.
Keep any installment loans which survive bankruptcy available, such as student loans, and pay them on time.
Apply for a secured credit card as soon as possible–one which reports to one of the major credit reporting bureaus. These cards require you to hold a sum in an account and lend you up to a matching amount as a credit limit. Make small purchases regularly and cover them in full once the bill comes due.
Try to get a high-interest rate unsecured credit card; a shop credit card may be the easiest one to get. Negate the high rate of interest by paying purchases off at total during the grace period. Never take a balance of over 30 percent of your credit limit.
Take a loan out on another large purchase, such as a vehicle, even if it is at a really large rate of interest. Scale down the amount of your buy to make certain that you can easily manage the payment. Making timely payments, and paying for down the loan quicker than agreed through larger payments, will show that you have learned your lesson and can handle debt more responsibly now.
Check your credit report periodically for errors as well as the reappearance of previous”student debt”–old debts purchased by collection agencies and reopened. If the debt is less than seven years old, then make reasonable repayment arrangements whenever possible to halt the negative reporting and further damage to your credit score. Consult a respectable credit counseling agency about the best way best to deal with a debt which is more than seven years old.
Apply for an FHA or VA mortgage after the appropriate waiting period is over and you’ve reestablished a credit history. Be prepared to explain your fiscal issues occurred, and everything you’ve done and plan to do to prevent it happening again.