Credit After Bankruptcy

On Behalf of | Nov 8, 2010 | Bankruptcy |

In these times of financial hardship more and more average Americans are looking for the protection and relief found from bankruptcy. Most don’t want to file; most didn’t ever think they would be in this position; all are worried about their future after they file bankruptcy. They want to know how their life will change after they file. Will they now have the ability to obtain new credit, or will this be a permanent black mark on their credit history?

New credit is absolutely possible after bankruptcy. Credit agencies, seeing that you now have your financial situation under control, will inundate you with credit card offers. Secured cards will typically offer lower rates than unsecured. This is not to say that you should sign up for all of these cards, but obtaining a new card or two that you can pay in full and on time will help you bring your credit score up very quickly. You can quickly increase your credit score by having one or two open cards that you never spend fifty percent of the limit, and always pay off as soon as the bill comes in.

If you didn’t have a home before you file, it is still within your reach. If it is an immediate need, you may need to apply for an FHA loan which typically requires a minimum credit score of 620 and you will most likely need to refinance at some point to lower your interest rate. If you can wait 18 to 24 months after your discharge, studies show that bankruptcy debtors can qualify for a loan on agreeable terms. Your interest rate will almost always be commensurate with your credit score so pay these new credit cards and any other installment payments on time. Never pay anything more than 30 days after it is due. Also, save up as much of a down payment as possible. Mortgage brokers are more inclined to work with you the higher your down payment is.

As mentioned before, you should be offered credit cards soon after you are filed. This evidences that filing bankruptcy generally is better for your credit than whatever financial situation lead you to read this blog. In most instances your credit score has tanked already: late payments, old debt, foreclosure, repossession, collection accounts, etc.  Bankruptcy allows you to put those in your past and start fresh, where your new credit can be good credit.