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Many people are worried that filing for bankruptcy will shut all doors of getting credit for them. However, this is not true at all. Though bankruptcy appears on your credit report, it does not mean that you won’t be able to buy a home after getting your bankruptcy discharge. On the contrary say Dallas based bankruptcy law firm Recovery Law Group lawyers, since all your bad debts are written off in bankruptcy, you are considered a good person to give credit to. In fact, applying for a credit card is the best way to rebuild your credit after bankruptcy. however, it is important to know that any debt you take after bankruptcy discharge is generally available at a higher interest rate and is monitored closely.
Effect of bankruptcy on credit rating
Bankruptcy is one of the best ways to get rid of a huge amount of debt that has been holding your credit score down, making it difficult for you to manage things. Since most of your unsecured nonpriority debt like credit card and medical bills are discharged, you can begin your financial life again. However, the drawback is that bankruptcy is mentioned on your credit report for as long as 7-10 years depending on which chapter of bankruptcy was filed. This serves as a warning for prospective lenders and may temporarily affect your credit. To ease the risk, many lenders charge a higher interest rate for a loan to people who have just come out of bankruptcy. But there is a silver lining; with time and continuous efforts, the credit card score improves. With timely payments on the loans, the effect of bankruptcy wears off.
Rebuild your credit using these methods
Rebuilding credit is extremely essential for you, especially after a bankruptcy. once you have rebuilt your credit, you will be able to procure home loan at reasonable interest. Here are some tips for rebuilding credit history:
- Opt for secured credit card and keep your payments limited. Alternately, you could opt for unsecured credit cards that offer credit at low interest.
- Make a habit of paying your bills on time so that you don’t end up in debt again. Additionally, timely payments are reflected on your credit report.
- Ensure that you keep track of your credit report; any debts that have been repaid should be reported as paid in a credit report. in case of any errors, report to the credit reporting bureau and get the change rectified.
Getting a mortgage is easy
Bankruptcy is not the best assurance for mortgage companies. They would like some reassurance that their money is safe. These are some criteria for mortgage companies before giving home loans:
- A down payment,
- A steady source of income,
- The 2-year stretch of on-time payments.
People might even get a loan before the 2-year period is over if responsibility is seen over bill payments (car loan or secured credit card). However, all of this is possible only after you get a bankruptcy discharge. Your bankruptcy lawyer can give you advice regarding life after bankruptcy. to speak with experienced bankruptcy attorneys, you can call 888-297-6023.