Secured Credit Cards To Rebuild Credit After Bankruptcy And Foreclosure

This Article Is About Secured Credit Cards To Rebuild Credit After Bankruptcy And Foreclosure

Credit cards to rebuild credit after bankruptcy and foreclosure is the most powerful way to re-establish credit to qualify for mortgages.

Let’s take a case study.

  • Say John Smith filed bankruptcy on January 20, 2015
  • His credit score has plummeted to 470 FICO after filing his bankruptcy
  • All of his credit cards were part of his bankruptcy and he has not applied for new credit since his bankruptcy
  • He also lost his home and was part of the personal bankruptcy he filed
  • All of his debts were discharged on July 20, 2015
  • His goal is to qualify for a home mortgage

In this article, we will discuss and cover Secured Credit Cards To Rebuild Credit After Bankruptcy And Foreclosure.

Getting Ready To Qualify For Home Loans With Secured Credit Cards To Rebuild Credit

Fast forward to today, February 26, 2017, and his credit score are now 550 FICO.

  • The reason his scores are better now than it was after filing Chapter 7 bankruptcy is that a consumer’s credit scores increase with time
  • As time goes by, even though the consumer does not get new credit, the credit scores improve and the previous bad credit begin not to have an impact on their credit scores

The longer the date of the last activity of the derogatory credit tradeline, the less impact that derogatory item has on consumer credit scores.

HUD Guidelines To Qualify For FHA Loans With Bad Credit

What are the HUD guidelines for qualifying for FHA loans with bad credit?

FHA Loans are the best loan program for homebuyers who need to qualify for a home loan with bad credit.

Here are FHA Guidelines on qualifying for FHA Loans with bad credit:

  • Need 580 credit score to qualify for FHA Loan with 3.5% down payment
  • Borrowers do not have to pay off outstanding collections and charge off accounts to qualify for FHA Loans
  • Borrowers can qualify for FHA Loans with prior bad credit
  • But lenders want to see that FHA Borrowers has re-established credit and timely payments for the past 12 months
  • Borrowers under 580 FICO credit scores and down to 500 FICO can qualify for FHA Loans but need to put a 10% down payment

No late payments on any credit tradeline after bankruptcy and foreclosure.

Start Re-Establishing Credit After Bankruptcy And Foreclosure

Now John Smith has re-established his financial situation with a steady job and steady income stream, John can start re-establishing his credit to qualify for a mortgage.

  • Many consumers who went through bankruptcy and/or foreclosure want nothing to do with credit and want to pay everything with cash
  • By not getting new credit will hurt consumers and hurt their chances of qualifying for a home loan in the future
  • No matter how much consumers want to stay away from credit cards or other means of credit, they need to get credit to start developing new credit tradelines
  • John Smith has a great job making $80,000.00 per year with great benefits
  • Has over $15,000.00 in savings
  • He needs to purchase a car and has enough money to pay it in cash and wants to someday purchase a home and needs to qualify for a home mortgage

He knows that he will probably have problems financing due to his poor credit history and low credit scores.

Secured Credit Cards Is Fastest And Easiest Way Of Re-Establishing Credit

Are secured credit cards the quickest and easiest way to restore your loan

John Smith now needs to start rebuilding his credit and improve his credit scores.

  • The best and fastest way to boost your credit score is through secured credit cards
  • The key number of credit cards you should have is 3
  • John Smith should get 3 secured credit cards with $500.00 limits
  • You should leave a balance of about $10.00 every month on your credit card
  • Each secured credit card will boost John’s credit score by 30 points

If he has three $500.00 credit limit secured credit cards and leaves a $10.00 balance on each of the 3 credit cards, John Smith can easily boost his credit scores by 100 plus points if not more.

How Many Secured Credit Cards To Rebuild Credit Is Ideal?

Secured credit cards will expedite the improvement of John Smith’s credit scores.

  • If John has a 550 credit score, just by adding a $500 credit limit secured credit card can boost his credit to over 650 FICO in a matter of three to six months
  • If he has three secured credit cards to rebuild credit with each secured credit cards with $500 credit limits, his credit scores can be closer to 700 FICO in a matter of six months
  • After six months to one year, John can qualify for other credit such as unsecured credit cards, auto loans, installment loans, and mortgage loan
  • Even though John Smith can purchase his automobile with cash, he should finance part of it so he has an auto loan in his credit report and can develop an automobile credit history on his credit report 
  • Even though it costs him extra interest expense, it is well worth it since the auto loan credit history will probably boost his credit score by another 30 points or so
  • His 650 credit score will now jump to 680 FICO
  • John can now qualify for an unsecured credit card, a department store credit cards, and/or a gasoline credit card
  • He will also qualify home mortgage loan since he will meet the minimum credit score requirement and has established credit tradelines

Homebuyers who need to qualify for FHA Loans with bad credit or lower credit scores, contact us at Gustan Cho Associates 262-716-8151 or text us for a faster response. Homebuyers can also email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

2 Comments
  1. Robert Garrison

    When should I start rebuilding and re-establishing credit after bankruptcy. Should I start as soon as my bankruptcy has been discharged? Good morning, I came across your email and was wondering if you were able to to provide me any information at all, if so I am extremely grateful. I am currently doing a background screening for NMLO license. Credit and background check came up.. I was battling cancer for last 3 years and credit went bad rather quickly. Would I be able to pass any states for licensing what so ever?

    Thank you for your time,

    Robert Garrison

  2. Piotr Bieda

    PROHIBITED CONDUCT AND PRACTICES
    PROHIBITED ACTS UNDER THE MORTGAGE BROKER ACT FOR THE STATE OF INDIANA
    A person may not, in connection with a contract for the services of a loan broker, do any of the following:
    • Employ any device, scheme, or artifice to defraud.
    • Make any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of circumstances under which they are made, not misleading.
    • Engage in any act, practice, or course of business that operates or would operate as a fraud or deceit upon any person.
    • Collect or solicit any consideration, except a bona fide third-party fee, in connection with a loan until the loan has been closed.
    • Receive any funds if the person knows that the funds were generated as a result of a fraudulent act.
    • File or cause to be filed with a county recorder any document that the person knows contains a misstatement, an untrue statement of a material fact, or omits a statement of a material fact that is necessary to make the statements that are made, in the light of circumstances under which they are made, not misleading.
    • Knowingly release or disclose the unencrypted, unredacted personal information of one (1) or more borrowers or prospective borrowers, unless the personal information is used in an activity authorized by the borrower or prospective borrower under any of the following circumstances:
    o The personal information is included on an application form or another form, or transmitted as part of an application process or an enrollment process.
    o The personal information is used to obtain a consumer report for an applicant for credit.
    o The personal information is used to establish, amend, or terminate an account, a contract, or a policy, or to confirm the accuracy of the personal information. However, personal information allowed to be disclosed may not be printed in whole or in part on a postcard or other mailer that does not require an envelope, or in a manner that makes the personal information visible on an envelope or a mailer without the envelope or mailer being opened.
    Licensees also may not:
    • Engage in reckless or negligent activity allowing the release or disclosure of the unencrypted, unredacted personal information of a borrower or prospective borrower.
    • Knowingly bribe, coerce, or intimidate another person to corrupt or improperly influence the independent judgment of a real estate appraiser with respect to the value of real estate offered as security for a residential mortgage loan;
    • Violate the federal Truth in Lending Act, The Real Estate Settlement Procedures Act, The Federal Equal Credit Opportunity Act, or any other federal law or regulation concerning residential mortgage lending.
    • Omit a material fact or fail to promptly correct a misstatement of material fact in an application made to the commissioner

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