How To Re-Establish Credit After Bankruptcy To Qualify For Mortgage

This BLOG On How To Re-Establish Credit After Bankruptcy To Qualify For Mortgage Was UPDATED On July 17, 2017

From the mid 1990’s until 2008, investing in real estate was the hottest game in town.

  • Real estate investment was believed by almost everyone to be the sure thing and the most safest investments. 
  • A lot of people and their neighbors were either real estate investors and/or wanted to invest in real estate. 
  • Homeowners throughout the country saw the equity in their homes grow by double digits.  
  • Homeowners were investing every dollar they could in improving their owner occupied homes by updating them and doing major additions believing they were investing in their homes and hoping the equity would keep growing year after year. 
  • Subprime Loans were the name of the game.
  • Almost anyone qualified for no doc and state income loans.
  • Home Depot’s, Lowes, and Menards were popping up everywhere. 
  • Contractors, real estate agents, mortgage brokers, appraisers, and real estate attorneys were having stellar year after year. 
  • Then the financial and real estate meltdown of 2008 struck like lightening.

2008 Real Estate And Credit meltdown

The real estate and credit meltdown of 2008 has hit every American from left field.

  • It hit homeowners and every consumer like a tornado. 
  • Bankruptcy rate soared to historic highs and foreclosures were on every block of American neighborhood.  Entire industries were evaporating.  
  • A substantial of mortgage companies went out of business overnight. 
  • A substantial of real estate companies vanished. 
  • Unemployment rates were reaching double digits. 
  • Half the mortgage loan originators in this country were forced to leave the industry and got menial jobs, some making minimum wages while others flocking back to schools to learn new trades.

Obtaining Credit After Bankruptcy

For those who had no way out, they were forced to file bankruptcy.

  • For folks who have filed bankruptcy, they should feel grateful because they have a fresh start. 
  • Credit after bankruptcy is not easy. 
  • Credit after bankruptcy should be a priority for those who have recently filed bankruptcy.

Bankruptcy And Credit Scores

A bankruptcy can lower a person’s credit scores by 200 points.

  • However, the good news is that even though consumers do nothing to do anything to Re-Establish Credit After Bankruptcy for credit scores to go back up. 
  • For example, someone who had a 650 FICO credit score prior to bankruptcy and just filed bankruptcy, credit scores will probably be at or around 450 FICO. 
  • Consumers do not do anything, get new credit or repair their credit, after Chapter 7 bankruptcy. 
  • Consumer credit score will probably be around 550 FICO one year after Chapter 7 bankruptcy discharge.
  • However, there are ways to Re-Establish Credit After Bankruptcy and expedite boosting credit scores.

Tips And Advice On How To Re-Establish Credit After Bankruptcy

There are ways to Re-Establish Credit After Bankruptcy to boost credit scores.

  • Adding new credit after Chapter 7 Bankruptcy with secured credit cards is best way to Re-Establish Credit After Bankruptcy.
  • Getting three secured credit cards with $500 credit limit is the easiest and fastest way of improving credit scores.
  • Each secured credit card can boost credit scores by 20 to 30 points.
  • As the bankruptcy ages, it will have less impact on credit scores.

The Power Of Secured Credit Cards

The easiest and fastest way to Re-Establish Credit After Bankruptcy is by adding new credit and being timely with new credit. Secured Credit Cards are the most powerful tools to Re-Establish Credit After Bankruptcy and getting prepared for mortgage.

  • Credit after bankruptcy can get started with the utilization of secured credit cards
  • Each secured credit card should boost credit scores by 20 to 30 points or more. 
  • Try to get three secured credit cards.  
  • Consumers who need to get an automobile and have the cash to buy it, take a step backwards and see get an installment automobile loan. 
  • Say a car buyer has $2,000 to purchase a $2,000 car. 
  • Instead of paying cash for the vehicle, make a $1,000 down payment and get a $1,000 automobile loan. 
  • This automobile loan will help reestablish credit and improve credit scores. 
  • Having a variety of different types of credit will optimize raising credit scores and improve credit.

Qualifying For Mortgage After Bankruptcy With Late Payments

Late Payments after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale is an automatic mortgage loan denial by most mortgage lenders.

  • Late Payments are alright if the borrower does not have a prior bankruptcy, foreclosure, deed in lieu of foreclosure, short sale as long as they have been timely in the past 12 months with all of their debt payments.
  • However, late payments after a bankruptcy and/or foreclosure is considered a second offender and will be a challenge getting approved.
  • Even if the Automated Underwriting System yields an approve/eligible per AUS FINDINGS, most lenders will not want to originate and fund the loan as part of their internal lender overlays.
  • The Gustan Cho Team can help borrowers with late payments after bankruptcy and/or foreclosure as long as the Automated Underwriting System renders an approve/eligible per AUS Findings. 

Home Buyers who need to get qualified with a mortgage lender with no lender overlays, please contact The Gustan Cho Team at 1-800-900-8569 or email us at gcho@gustancho.com.

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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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