Question from reader: How do I fix my credit after filing bankruptcy to
buy a house?
Answer by Jeanette Joy Fisher
Some mortgage lenders will give you a home loan right away after bankruptcy.
However, you will need a large down payment, a great income and good employment
history, and pay higher interest rates and closing costs. You can also work on
building new credit and get a better loan package after one year.
Millions of Americans are forced to declare bankruptcy every year, but
even if you're one of those people, you can begin immediately to rebuild your
damaged credit by taking a few relatively easy steps. Here are some ideas to
help you get on with your life after bankruptcy:
1. Pay all of your bills on time from now on. Even one late pay after a bankruptcy
can cause mortgage denial.
2. Although it will be tempting to
do because you'll be eager to get another credit card, resist the temptation to
apply for a lot of new credit. Making a bunch of credit applications all at
once actually can lower your credit score and make it harder to secure new
lines of credit.
3. Whether you love them or hate them, credit cards are a necessity in
today’s world, even if you don't actually plan to use them. There are many
things you simply can't do if you don't have a Visa card or other major credit
card, such as rent a car, since rental companies will require you to show them
a credit card even if you're paying cash. Since that's the reality of the
modern world, look into getting a secured credit card.
Secured credit cards require you to put a certain amount of money into an
account (typically between $300 and $500), which is then considered as
collateral for your purchases using the card. You're then allowed to charge any
amount of money on your card, up to the amount you have in your account, and
repay it in monthly installments.
The nice thing about secured cards is that they look no different from
any other card, so you can use them as ID or to make purchases (as long as you
don't go over your limit) and they allow you to begin reestablishing your
credit by showing that you can make payments in a timely fashion, regardless of
your previous history. As you begin to prove your creditworthiness, you may be
rewarded with an increase in the amount you can charge that’s above what you
have in your account.
A good place to begin your search for your first secured credit card is
through your local credit union. They're often more flexible than banks, and a
number of them will actually waive the annual fee that most secured cards
charge. If you aren't a member of a credit union, shop hard for your secured
card, because there are wide variations in the terms, fees, interest rates, and
requirements. Some companies will even charge you a fee just to apply for a
card!
You can begin rebuilding your credit almost immediately following a
bankruptcy. Talk to a loan officer to help you make a specific plan for your
situation.
Get the credit you need to buy real estate. Free Credit Tips for Mortgage
Financing and Wealth-Building Tools ebook at the Real Estate Credit Help Center.
Credit Card Debt Help
Copyright © 2006 Jeanette J. Fisher