Once your bankruptcy is discharged it’s critical to begin rebuilding your credit as quickly as possible. Improving credit will not only reduce your interest rates but it’s required in order to get a mortgage especially with today’s new stricter lending guidelines. The good news is that even though a bankruptcy will remain on your credit file for up to 7 years it’s possible to get a mortgage much sooner. There are some lenders who will give you a mortgage within 6 – 12 months but the interest rate won’t be very attractive and you will be required to come up with a larger down payment. However you can usually qualify for a mortgage with a good interest rate and normal down payment within 2 years. The key is to get started right away and work deligently towards your ultimate goal of home ownership.
- After discharge check your credit report with the major credit bureaus and verify that there are no errors in your report. For Americans: Equifax, TransUnion and Experian. For Canadians: Equifax and TransUnion
- Talk to your bank and let them know that you want to re-establish your credit rating.
- If you don’t already have one; open a savings account and begin saving at least 5% of your income every month.
- Apply for a secured Visa or MasterCard from your bank. A secured credit card means that you deposit money either into a special account or your bank will “freeze” a certain amount in your savings or chequing account. This money is used to secure any purchases you make on your credit card.
- Charge items to your secure card and pay them off completely every month. As each month passes your credit rating gets better and better.
- In 3 – 6 months apply for a seperate unsecured credit card, either from your bank or another one.
- Another 3 months of on-time payments and you can apply to have your secure card replaced with a second unsecured card.
- At around the 12-18 month mark apply for a car loan, car lease, or another line of credit from a bank. This is the third and final credit account most banks look for when considering you for a mortgage.
- Finally at the 24 month mark it’s time to review everything and apply for your home loan!
Always Remember: During these 2 years it is absolutely vital that you never make a late payment!
This article is syndicated from Homes Everyday – How to Rebuild Your Credit After Bankruptcy