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4 Simple Steps For Rebuilding Your Credit To Purchase a Home After Bankruptcy

Written by Posted On Friday, 16 July 2021 02:45
4 Simple Steps For Rebuilding Your Credit To Purchase a Home After Bankruptcy

Your credit card debt may be discharged from bankruptcy. You are reaping the benefits of financial freedom. That said, you may be curious what your next steps look like for credit access. Fortunately, there are different ways to gain access to credit again after filing bankruptcy. Most people cannot do a full cash purchase, so having great credit can help you acquire a mortgage.

Over time you should start to see your credit score impact with regards to bankruptcy start to dissipate. However, you should still see Chapter 7 bankruptcy on your credit report for 10 years. A Chapter 13 bankruptcy is on your credit report for 7 years. There are different time parameters on how long each bankruptcy type remains on the credit report. That said, there are often different term lengths for getting a house after bankruptcy compared to getting a general loan after bankruptcy. Whereas for renting an apartment, the guidelines for that tend to be more on a case by case basis.

Generally, as soon as you are discharged from bankruptcy you are able to start rebuilding your credit. Building your credit can make you more enticing to creditors to offer credit again. The goal of this article is to:

  1. Learn About New Credit Opportunities to Rebuild Credit Post Bankruptcy Discharge
  2. See What Your Credit Report and Credit Score Looks Like Post Bankruptcy
  3. Find out about the different tools you have to your disposable to help rebuilding credit after bankruptcy
  4. Learn what it looks like to manage your financial portfolio post bankruptcy discharge

1. Learn About New Credit Opportunities to Rebuild Credit Post Bankruptcy Discharge

Fortunately, there are many different new credit opportunities for after filing bankruptcy. Something to note is that it may be beneficial to wait until bankruptcy discharge to apply for new credit. To offer some insight, here are some different credit opportunities to consider.

1) Secured Credit Cards

As stated before, it is important to be cautious when applying for new credit opportunities. Each new credit application may do a hard credit pull, which can temporarily decrease your credit score.

Secured cards are helpful as they can tend to be easier to get after filing bankruptcy. You will need to put a deposit on the card with the creditor. This reduces the risk to the creditor if you don’t make payments. You are able to use the card to start making small purchases and gaining access to credit again. One thing to note is that it is important to clarify that the secured credit cards you are applying for reports to all the credit report agencies, if they don’t you may not see your credit score improving.

A mix of credit improves your credit score. Before taking on credit, understand how much bandwidth you have in your budget. Be cautious when getting loans after bankruptcy. You need to ensure you can afford the payments, or you could risk undoing the improvements you have worked so hard to make.

2) Store Credit Cards

Store credits are fortunately widely available, which can make it an available option for the first steps to rebuilding credit after bankruptcy. Sometimes you can see that the store credit cards have a high APR so that is something to take into consideration before applying for any store credit cards.

2. See What Your Credit Report and Credit Score Looks Like Post Bankruptcy From Being Below Income Limit

It is very important to understand that your credit score and credit report will be impacted through bankruptcy. You will see the bankruptcy filing details on your credit report, as well as the credit score impact. Let’s expand and jump into the weeds of all of this.         

Credit Score Impact After Bankruptcy Discharge

Credit score tends to decrease when you file bankruptcy, but one thing to note is that it decreases temporarily. Sometimes folks can see their credit score actually increase after bankruptcy. This is the result of old debts that are released from the credit report. Unfortunately it is hard for us to see what the immediate impact to credit score is for all individuals filing bankruptcy.

Something to note is that the credit score impact attributed from bankruptcy really depends on what your credit score is going into the filing. For instance, some folks may have a lower credit score already going into bankruptcy. This population’s credit score may increase after bankruptcy.

However, this is good news. Individuals can see an increase in their credit score as soon as a year post bankruptcy discharge.

Post COVID, you may need a minimum FICO score of 640 to consider buying a house after bankruptcy.

Credit Report After Bankruptcy Discharge

It has shown that there can be credit report errors found after filing bankruptcy. The Public Interest Research Group conducted a study which found that 29% of credit reports contained errors. Fortunately, you are able to check to see if your credit report has any errors by receiving a free copy of your credit report from each of the three main bureaus: TransUnion, Experian, and Equifax every year.

As it can be sometimes hard to tell if there are errors on your credit report, here are four different things to look out for after bankruptcy:

  1. All of the discharged debts should not be receiving any further delinquency listings each month.
  2. The month to month breakdown for each of the debts should show that you are not late post bankruptcy, as well as the debts included should show as $0.
  3. The accounts that were paid off before filing bankruptcy could be shown as paid or closed.
  4. The report could look different for debts that were not included in the bankruptcy compared to those debts that were.

3. Post Bankruptcy Rebuilding Credit Tools

Thankfully, the good news is that there are different rebuilding credit tools to your disposable after bankruptcy discharge. You can use these tools to keep track of your credit score and learn about new ways to improve it over time.

Government Issued Credit Report

Every 12 months you are able to receive a free credit report through the FTC. You can get your free credit report here so that you can keep track of your current credit report and score. This is a good option to use when you are first being discharged from bankruptcy, as you are able to see if your credit report has any of the errors talked about earlier in the article.

  1. Manage Your Financial Portfolio Post Bankruptcy Discharge

The good news about bankruptcy is that it should be taking care of your unsecured debt, which should give you a good sense of relief once the entire process is over. You should no longer be receiving any repeated calls from credits and collectors. With that being all said, the next steps post bankruptcy can be focusing on managing your finances after discharge.

The benefits of taking care of your finances after bankruptcy can include:

  • Increase chance of credit access approval
  • Better control of your income and expenses each month
  • Enables the ability to plan your big purchases to come down the road’
  • Give yourself a cushion to protect yourself from any financial problems that may arise
  • Improves your ability to make decisions on how you spend your money

Budgeting can be a great gateway to understand your daily expenses and how much money you are able to put away for big purchase savings. There are many different types of budgeting to use, so finding the right one for you is crucial. One thing to note is while budgeting is extremely helpful, it may be very important to focus on improving your credit score post Chapter 7 discharge.

Conclusion

You qualified for bankruptcy by being under the income limit, but now it’s time to rebuild credit to purchase a home. Rebuilding your credit can be a tedious and intimidating mountain to face. If you follow different steps as well as use a tracker, it can make the process a lot more feasible. If your score was only impacted negatively, use these four steps to help you start rebuilding your credit.

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Lynn Donn

nanaimohomes4sale.com

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