Re-Establishing Credit During Waiting Period: How to Boost Your Credit and Get a Mortgage
Life happens. Job loss, medical emergencies, divorce, or business failures can lead to financial setbacks, including bankruptcy, foreclosure, short sales, or deed-in-lieu of foreclosure. The good news? You can rebuild.
Even if you’re in a waiting period after a significant financial event, you don’t have to wait to improve your credit. Smart steps today can set you up to qualify for a mortgage faster and at better terms.
This guide covers re-establishing credit during waiting period so you can qualify for a mortgage.
Understanding Mortgage Waiting Periods After Bankruptcy or Foreclosure
Before we dive into credit rebuilding, here’s a quick overview of 2025 mortgage waiting periods based on loan type:
Waiting Period After Bankruptcy
- FHA & VA Loans: 2 years after Chapter 7 discharge, 1 year into a Chapter 13 repayment plan with trustee approval.
- Conventional Loans (Fannie Mae & Freddie Mac): 4 years following a Chapter 7 discharge, 2 years after a Chapter 13 discharge (4 years if the case is dismissed).
- USDA Loans: 3 years after Chapter 7 or Chapter 13 discharge.
Waiting Period After Foreclosure or Short Sale
- FHA & USDA Loans: 3 years from the recorded foreclosure date or short sale.
- VA Loans: 2 years after foreclosure, short sale, or deed-in-lieu.
- Conventional Loans: 4 years after a short sale or deed-in-lieu; 7 years after a foreclosure.
If you’re trying to buy a home after a tough time, like going through bankruptcy or foreclosure, Gustan Cho Associates can help. They offer special loans called non-QM loans. These loans let you start re-establishing credit during waiting period. You won’t have to wait long, and you can use different ways to show you can pay. It’s a chance to get back on your feet and own a home again.
How to Re-Establish Credit During Waiting Period
Re-establishing credit during waiting period can be important for your financial future. Even if you can’t get a loan right now, you should show lenders that you handle money well. Here are some easy ways to help rebuild your credit score:
1. Get Secured Credit Cards
The fastest way to rebuild credit is to open three secured credit cards with a limit of at least $500 each.
Why it works: Secured credit cards report to all three credit bureaus: Experian, Equifax, and TransUnion. Using them shows lenders that you are responsible with credit. This can be especially helpful for re-establishing credit during waiting period after financial setbacks, as it helps rebuild your credit history.
Rules to follow:
- Never miss a payment—one late payment can drop your score by 80+ points.
- Keep balances below 10% of the credit limit.
- Avoid unnecessary hard inquiries (they can lower your score).
Pro Tip: Avoid department store cards—they have high interest rates and don’t boost your score as much.
2. Report Rent and Utility Payments
Rental verification shows great weight for mortgage lenders. Rental verification, although not reported to the credit bureaus, carries more weight than any new credit items that are reported on the credit report.
Most lenders don’t automatically see rent and utility payments on your credit report. But you can self-report them to boost your score.
How to report rent:
- Use services like Experian Boost, LevelCredit, or Esusu to report rent payments.
- Ensure on-time payments for at least 12 months.
How to report utilities:
- Experian Boost allows you to report cell phone, electricity, water, and even Netflix payments.
Why it matters: Understanding the importance of rental history is crucial, especially for those re-establishing credit during waiting period. Many lenders need proof that you’ve been paying rent consistently for at least a year for manual underwriting. This rental history shows them that you’re responsible and can manage your finances well, which can help you secure a loan or credit.
3. Open a Credit-Builder Loan
A credit-builder loan helps boost your score by building a positive payment history.
How it works:
- You deposit a set amount each month into a savings account.
- Once paid off, you get the money back (minus small fees).
- Reports on-time payments to the credit bureaus.
Where to get one:
- Self (formerly Self Lender)
- Local credit unions or community banks
- Online lenders like SeedFi
Pro Tip: Avoid payday loans or high-interest installment loans when re-establishing credit during waiting period. They do not help build credit effectively.
4. Become an Authorized User
Consider requesting a family member or a close friend to include you as an authorized user on their credit card. This can help you with re-establishing credit during waiting period. By being added, you can benefit from their positive credit history, which might improve your credit score. It’s an easy way to build your credit while waiting for other issues to clear up.
Benefits:
- Their good payment history is added to your report.
- Can increase your score by 50+ points quickly.
- No responsibility to make payments (but make sure they pay on time!).
Choose a card with:
- Low balance-to-limit ratio (under 10%)
- Long positive payment history
5. Avoid Overdrafts & Keep Bank Statements Clean
Lenders will check your bank statements from the last 60 to 90 days. They want to see consistent cash flow and zero overdrafts.
Best practices:
- Always keep a positive balance.
- Use overdraft protection (but avoid relying on it).
- Limit large unexplained deposits (lenders need a paper trail for all large transactions).
Pro Tip: Be careful with small amounts when re-establishing credit during waiting period. Even a $5 overdraft can cause problems with some lenders. Keeping your account in good shape is important to build back your credit score.
6. Pay Off Collections & Keep Debt Low
Some collections don’t need to be paid off for mortgage approval, but paying off smaller debts can increase your score.
What to focus on:
- Pay off small collections under $1,000.
- Negotiate a “Pay for Delete.” When re-establishing credit during waiting period, you can ask the creditor, like a collection agency, if they would take the negative mark off your credit report if you pay what you owe. Just be sure to obtain their agreement in writing to have documentation.
- Keep credit utilization below 10% on credit cards.
Pro Tip: When re-establishing credit during waiting period, paying off old debt can be helpful. It might not always increase your credit score, but it can help you get approved for loans.
Final Thoughts on Re-Establishing Credit During Waiting Period
Re-establishing credit during the waiting period is important and can help increase your score. If you follow these simple steps, you could increase your score by 100 points or more within 6 to 12 months.
For example, if your score starts at 500 after bankruptcy, you can use secured credit cards, report your rent, and keep a clean banking history. After 12 months of doing this, your score could be over 650.
If your credit score is 640 or above, you might be eligible for:
- FHA or VA Loans (even with a low down payment)
- USDA Loans (for rural areas)
- Non-QM loans with flexible guidelines
Get Pre-Approved with Gustan Cho Associates
At Gustan Cho Associates, our focus is on assisting borrowers who may not fulfill conventional lending criteria. Whether you’re navigating a waiting period or require assistance with credit, we offer loan solutions that do not include lender overlays.
Borrowers who need a five-star national mortgage company licensed in 48 states with no overlays and who are experts on re-establishing credit during waiting period, please call or text us at 800-900-8569 or email gcho@gustancho.com.
Re-establishing credit during waiting period is possible—start today and secure your future home!
Frequently Asked Questions About Re-Establishing Credit During Waiting Period:
Q: What does “Re-Establishing Credit During Waiting Period” Mean?
A: It means improving your credit score while you wait to qualify for a mortgage after bankruptcy, foreclosure, or another financial setback.
Q: How Long do I Wait After Bankruptcy or Foreclosure to Buy a Home?
A: It depends on the loan type. FHA loans require a 2-year wait after Chapter 7, while conventional loans require 4 years. Foreclosures usually require a 3- to 7-year wait, but non-QM loans may allow you to qualify sooner.
Q: What is the Fastest Way to Rebuild My Credit During the Waiting Period?
A: Opening secured credit cards, paying bills on time, reporting rent and utilities, and keeping credit card balances low can help boost your score quickly.
Q: Can I Get a Mortgage While Re-Establishing Credit During Waiting Period?
A: Yes! Some lenders, like Gustan Cho Associates, offer non-QM loans that allow you to qualify before the waiting period ends.
Q: Will Reporting Rent and Utility Payments Help My Credit Score?
A: Yes! Using services like Experian Boost or Esusu, you can add these payments to your credit report, showing lenders that you pay on time.
Q: Should I Pay Off Collections While Re-Establishing Credit During Waiting Period?
A: Paying off small collections under $1,000 can help. You can also ask for a “pay for delete” to remove negative marks from your credit report.
Q: Does Becoming an Authorized User on Another Person’s Credit Card Improve My Credit Score?
A: Yes! If a family member adds you to their credit card with a good payment history and a low balance, your score could improve fast.
Q: What Should I Avoid While Re-Establishing Credit During Waiting Period?
A: Avoid late payments, high credit card balances, overdrafts, and unnecessary hard inquiries on your credit report.
Q: Can I Still Get a Mortgage with a Low Credit Score?
A: Absolutely! FHA loans accept credit scores starting at 500, provided a higher down payment is made. In contrast, non-QM loans offer adaptable choices for individuals with lower credit scores.
Q: How Long Does Improving My Credit Score During the Waiting Period Take?
A: If you follow the right steps, your credit score can increase by 100 points or more in 6 to 12 months, making it easier to qualify for a mortgage sooner.
This blog about “Re-Establishing Credit During Waiting Period” was updated on February 25th, 2025.
