Re-Establishing Credit To Qualify For FHA Loan After Bankruptcy
This Article Is About Re-Establishing Credit To Qualify For FHA Loan After Bankruptcy
Consumers who recently went through a bankruptcy or foreclosure should seriously consider reestablishing credit as soon as possible:
- When should you start rebuilding your credit after bankruptcy?
- As soon as the bankruptcy has been discharged
- The team at Gustan Cho Associates has helped countless folks get their credit scores over 700 FICO in less than one year after bankruptcy
- Do not hire any credit repair companies
- Credit repair can do more damage than good for people who are planning on qualifying for a mortgage after bankruptcy
- You cannot have credit disputes during the mortgage process
- Any non-exempt credit disputes need to be removed in order for the mortgage process to proceed
- Credit disputes for the sake of taking a chance in getting derogatory credit tradelines removed without documentation can cause many hurdles and issues during the mortgage process
- Credit disputes with solid documentation proving creditors made an error is fine
- Lenders can do a rapid rescore with the three credit bureaus and correct consumer credit report in three to five days if the errors are legitimate
Credit disputes without proper documentation can backfire on borrowers during the mortgage process.
Impact Of Bankruptcy And Foreclosure On Consumer Credit Scores
Consumer credit scores will definitely drop by more than 150 plus points after bankruptcy or foreclosure on the credit report:
- The good news is that the sudden massive drop in credit score is just temporary
- Scores will eventually go up as time passes
- It might take a long time but it will naturally go up as bankruptcy and/or foreclosure ages
- Adding positive credit such as three secured credit cards will expedite boosting credit scores
- After a few years, although bankruptcy and/or foreclosure record remains on the credit record, it will have little or no impact on scores
- For homebuyers planning to buy a home in a few years, it is recommended they start Re-Establishing Credit To Qualify For FHA Loan
- They should start Re-Establishing Credit To Qualify For FHA Loan right away after filing bankruptcy and/or foreclosure
In this article, we will cover and discuss Re-Establishing Credit To Qualify For FHA Loan After Bankruptcy.
Re-Establishing Credit To Qualify For FHA Loan To Prepare For Home Purchase
For homebuyers who are planning on getting a residential mortgage loan in the near future, here are some tips and advice:
- At least 3 to 5 credit tradelines such as credit cards and/or installment loans that have been established for at least a year
- No late payments after a bankruptcy or foreclosure
- Late payments after bankruptcy and/or a housing event is really frowned upon by lenders
- Lenders classify borrowers with late payments after bankruptcy and/or foreclosure as second offenders and will not want anything to do with them
- Verification of rental income
- Make sure when to pay rent payments with a check and never cash
- When it comes to applying for a mortgage, the lender will ask for 12 months of canceled checks and/or bank statements
No overdrafts or bounced checks in the past 12 months.
Quickest Method Of Re-Establishing Credit To Qualify For FHA Loan
The quickest way of re-establishing your credit is not by hiring a credit repair company, but by establishing new credit via the use of secured credit cards.
- Getting an unsecured credit card after a bankruptcy and/or foreclosure will be next to impossible to get approved
- However, getting up to secured credit cards will definitely boost credit scores
- Three secured credit cards are the optimal number with at least a $500 credit limit
- Anything over three credit cards will not have more effect
Each secured credit should boost credit scores by at least 20 to 30 points for a total of 60 to 90 points with three secured credit cards.
Secured Credit Cards To Improve Credit
For consumers who are timely with three secured credit card payments for six months to a year, the secured credit card companies will raise credit limits without having an additional deposit.
- After a year of having a timely historical payment history, consumers will be able to apply for unsecured credit cards
Hiring Credit Repair Companies
Consumers can also hire credit repair companies to help repair credit and improve credit scores.
- However, many times, credit repair companies are not needed:
- This is because as derogatory credit ages, it has no impact on credit scores
- All derogatory information on the credit report will remain on the credit report for a period of 7 years
- As time ages, the derogatory information will have less impact on scores
- However, the negative item will remain on the credit report for 7 years from the date of last activity
- Anyone can repair their own credit
- However, for those who do not have the time to tackle such task, they can hire a credit repair company to dispute the errors on their credit report
- Credit disputes during the mortgage process are prohibited
- and possibly derogatory information from their credit reports
Borrowers do not have to pay off outstanding collections and charge off accounts to qualify for FHA Loans. Home Buyers who need to qualify for FHA Loans with bad credit with a lender with no lender overlays, please contact us at 1-262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates are experts in helping borrowers rebuild and re-establish credit after bankruptcy and/or a housing event. The team at Gustan Cho Associates has helped countless folks get credit scores over 700 FICO in less than one year after bankruptcy.