Re-Establishing Credit After Bankruptcy
There are mandatory waiting period after bankruptcy and foreclosure in order to qualify for another residential mortgage loan. The waiting period for someone who has a previous bankruptcy is two years from the discharge date of the bankruptcy and not the filing date. However, just passing the waiting period after bankruptcy does not guarantee someone a residential mortgage loan approval. The two year minimum waiting period after the bankruptcy discharge date is just one of the requirements to qualify for a residential mortgage loan. Mortgage lenders do not want the mortgage loan applicant to have any late payments or derogatory credit items after a bankruptcy and have re-established their credit. Re-establishing credit after bankruptcy?
Re-Establishing Credit After Bankruptcy
A bankruptcy will drop someone’s credit scores by at least 150 points or more. Your credit is shot. Chances are that no creditor will give a person who just filed bankruptcy and had a bankruptcy discharge credit so how can someone re-establish credit after a bankruptcy? The best way to re-establish credit after bankruptcy is by getting secured credit cards. People who just got a bankruptcy discharge just assume that they will no longer get credit and give up on re-establishing credit. However, this is not the case. You can easily get credit scores of over 700 FICO one year after a bankruptcy discharge as long as you play your cards right. As soon as you get your bankruptcy discharge, please get three to five secured credit cards.
Credit After Bankruptcy
Chances are that your credit scores will be in the upper 400’s after your bankruptcy discharge is recorded. No worries. That low credit score is just temporary. Your credit scores will most likely go to the mid 500’s even if you do nothing about re-establishing credit after bankruptcy. However, if you can get three to five secured credit cards, each secured credit card will boost your credit scores by at least 20 or more FICO points. It gets even better. As your credit payment on those secured credit cards ages, your credit scores will even get higher. If you keep using your secured credit cards regularly and pay it down so your credit balance is not higher than 25% of your credit limit, there is no reason why your credit scores would not be in the upper 600’s or lower 700’s one year after your bankruptcy discharge date.
Secured Credit Cards: Road To Great Credit
Secured credit cards are the best tools in re-establishing credit after bankruptcy. Secured credit cards are the so important in re-establishing credit after bankruptcy. Your secured credit card company will most likely increase your credit limit after one year if you have a good payment history without requiring you to put any additional deposits. The way a secured credit card works is the secured credit card company will require you to put a deposit with them for a certain amount you choose. For example, you can get a secured credit card by placing a $500 deposit with the secured credit card institution. In return, the secured credit card company will issue you a secured credit card with a $500 credit limit. There will be a minimum amount due each month and interest will be charged on your balance even though you have a $500 deposit with the secured credit card institution.
Credit Reporting Agencies
Secured credit card companies will report your credit card limit, balance, minimum amount due, and payment history. If you are late with your minimum secured card monthly payments, it will be reported late on all three credit bureaus and your credit scores will drop and your late payment history will be reported on your credit report. A secured credit card is like an unsecured credit card and a late payment on a secured credit card is no different than a late payment on a traditional unsecured credit card. If you religiously use your secured card and make your secured card payments timely every month, your secured credit card company will most likely give you a credit limit increase without requiring additional deposit. After one year seasoning of timely payment history on your secured credit cards, you will be eligible to apply for unsecured credit cards as well as other unsecured credit such as gas cards, department store cards, furniture store cards, and other credit. Remember to always make the minimum credit card payment on time and never be late. One late payment on any credit card or creditor can drop your credit scores 50 or more points and that late payment history will be on your credit report for a period of 7 years.
Qualifying For Mortgage After Bankruptcy
Qualifying for a residential mortgage loan after bankruptcy is not difficult. First and foremost, there is a mandatory two year waiting period after bankruptcy in order to qualify for a FHA loan. There is a 4 to 7 year waiting period to qualify for a conventional loan after filing bankruptcy. Mortgage lenders want the mortgage loan borrower to have re-established credit after bankruptcy and no late payments after their bankruptcy discharge. One or two late payments are not deal killers but a habitual late payments, collections, charge offs, and disregard for credit will not fly. As long as the mortgage loan applicant has re-established credit after bankruptcy and has passed the mandatory two year waiting period, they should have no problem in qualifying for a residential mortgage loan.