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Bankruptcy can leave some devastating scars on your credit file for up to a decade after official discharge. Getting a loan or any type of credit following bankruptcy can be difficult, especially if you do not know how to appropriately position yourself as a responsible buyer. But it is possible. Let us have a look at what you must do following your bankruptcy and how you can become a homeowner regardless of the bankruptcy notation on your credit file.
Checking Your Credit File
The first step that must be made following bankruptcy is to check the accuracy of your credit file. This is important because not all credit bureaus are as eager as other to note changes on your report. By having all of the debts that were discharged duly noted as such, you can assure that you are on the right track to getting back your financial health.
Check your report with all three major credit bureaus, Experian, Trans Union, and Equifax to be certain that each of them have noted the accounts that were discharged. If they have failed to do so, notify them of the oversight immediately in writing. You are entitled to one free copy of your credit report annually by law from each of the bureaus.
Establishing New Credit
That being done, you should proceed to establish two secured credit card accounts. Your credit line will be determined by the amount of deposit that you make with the credit card company. Be certain to charge no more than one-half of your available funds each month, and to run a one-third balance that you make monthly payments on. This will help to establish points with the credit bureaus and start you on the road to recovery. Never send in a late payment. Pay promptly, on time or before time, each and every month. If possible, set up an online payment option.
Showing Responsibility And Money Management Skills
Your next step is to establish both a checking and a savings account. Will this give you points with the credit bureaus? No. But it will make you appear to be a responsible person and help to demonstrate your ability to manage your finances when future potential creditors are considering loaning you money. These types of accounts will also help you stay on a budget, if used appropriately. Your savings account should be used to save whatever amount you can afford towards a down payment on your future home.
Once you have these things in place, you can proceed to ask for a small loan. A secured personal loan (where you pledge collateral) is your best bet. Borrow no more than $1,000, and pay off the balance as agreed. That being done, you can move up to an unsecured loan, again, in a small amount. Pay off the unsecured loan as agreed. Eventually, within a year or so, you can take out a larger loan, such as a car loan, and begin to demonstrate positive payment history in that way.
Moving Up to Home Ownership
During this time, you are working your way up to home ownership. If a couple of years have passed since the bankruptcy was discharged, and you have followed the above steps, you should have a fairly decent credit report in the works. If you have been saving diligently towards your down payment, you are now ready to apply for a home loan. Keep in mind that you might see an initial turn down. If so, follow the steps above to the tee, adding more valuable points as you go. And before you know it, you will be approved for the home that you never thought you would ever qualify for. |
