Is there credit after bankruptcy? There is! Although bankruptcy can stay on your credit record for seven to ten years, in about one to two years you can probably rebuild your credit to a point that will get you approved for just about any loan, even a home mortgage. Most creditors look for steady employment and a history, after bankruptcy, of making and paying for purchases on credit. Many creditors disregard bankruptcy entirely after four or five years.
Bankruptcy Can Improve Your Credit Score
We understand that this statement seems counter-intuitive but most of the time filing for bankruptcy clears up what is on your credit report so that your score does improve. In most cases by the time one of our clients files for bankruptcy they have already experienced late payments on their mortgage, credit cards, they may have collection accounts that have been opened by creditors, lawsuits may have been filed and judgments may have been entered. Filing for bankruptcy clears this up and gets rid of those debts that you owed, thereby improving your credit score.
In the long run, bankruptcy may actually improve your ability to obtain future credit. One of the most important items on your credit report is your debt-to-income ratio and, after bankruptcy that number usually improves substantially because your debts are largely eliminated. Also, without the burden of debts you’ll be able to save for a down payment on property which always improves your standing with lenders. You also may not realize you will be eligible for a Federally secured FHA Loan just one-three years after bankruptcy depending on which chapter you filed and your financial situation.
Getting Credit After Bankruptcy Again
We actually see many of our clients credit scores go up after receiving a discharge of their debt, and many are surprised to receive credit card offers in the mail just a few months after filing for bankruptcy! Creditors love those who have just completed a bankruptcy, because they cannot file again for up to 8 years. They are considered a “safe bet.” Just be careful as these offers typically come with high interest rates.
Steps To Rebuilding Credit After Bankruptcy
The first step to rebuilding your credit is to stay within a budget. Controlling spending and saving money are essential after bankruptcy. Think about the changes you can make to your spending habits to save even just a few dollars a week. Setting and achieving small goals can be very inspiring and lead you to much greater saving than you thought possible. Most people can usually cut at least 5% from their spending by simply avoiding impulse buying, paying cash for things, and preparing more meals at home.
Often credit reporting agencies will inadvertently put negative entries on your credit report that don’t belong there. With so many files to manage there are bound to be mistakes. It’s a good idea to periodically review your credit report to ensure all entries are accurate. If there are incorrect entries, you may challenge those items. The credit reporting agency will then correct your file, if they can’t verify the item. To contact the credit reporting agencies you can use the following links: www.Equifax.com; www.Experian.com; and www.Transunion.com.
Secured Credit Cards-A Smart Bet for Credit After Bankruptcy
Banks provide an excellent opportunity to rebuild credit by offering secured loans or secured credit cards. Golden One Credit Union offers a secured credit card. Secured loans are linked to some piece of property such as your car or a piece of machinery you may own. If you don’t have any security to offer, it is usually possible to get a bank loan with a co-signer. For maximum benefit, keep the loan active for at least 6 months, even if you can pay it back sooner. This will give the bank a chance to report the loan to all three credit reporting agencies. Some things to consider when shopping for a loan are interest rate, and prepayment penalties. Naturally you want the lowest interest possible with no prepayment penalty. Secured credit cards offer similar benefits to bank loans and give you a chance to rebuild credit.
Many of our clients have found their scores above 700 just a year or two after filing for bankruptcy and others have been able to go out and secure a car loan at a decent interest rate (under 5%) in less than a year after filing for bankruptcy.
Buying A Home After Bankruptcy
Through our affiliated in-house real estate brokerage, StoneCrest Realty, we work with a lot of our bankruptcy clients to help repair their credit, find the home they are looking for and buy again when they are ready.
Experienced Sacramento Bankruptcy Lawyers
We are experienced Sacramento Bankruptcy Lawyers. We have helped thousands of individuals and businesses get the relief they need from their creditors through the use bankruptcy by filing a Ch. 7, Ch. 13, credit card debt negotiation or debt settlement and have successfully dealt with adversary proceedings brought by difficult creditors. Our bankruptcy lawyers have achieved proven results and can give you the great legal advice and strategy needed to get you the results you want. Contact us today to schedule your complimentary attorney consultation by clicking HERE or by calling 916-999-1376. We look forward to helping you with all of your Sacramento bankruptcy needs.
