A bankruptcy will remain on your credit report for seven to ten years. During this time, purchasing a new home, car, or obtaining a credit card with a prime interest rate will be tricky. Nonetheless, you need to establish or rebuild your credit. When lenders review your credit application, your score is a key determining factor in whether you are approved. If you have not opened new credit accounts since your bankruptcy, lenders cannot accurately judge your creditworthiness.
There are many ways to re-establish credit after a bankruptcy. Getting a department store charge card or a credit card is an option. If you cannot get approved for an unsecured credit card, consider applying for a secured card. Typically, this involves putting a down payment on the card.
When Should You Apply for a Home Mortgage Loan?
If possible, delay applying for a new home loan for at least two years following your bankruptcy. This will allow you ample time to rebuild your credit and boost your credit score. By doing this, you may qualify for better or comparable interest rates.
Several lenders will approve a mortgage loan application one day following a bankruptcy discharge. Unfortunately, the interest rates on these loans are several points higher than current market rates. This rate increase will significantly increase your monthly mortgage payment.
How to Get Approved for a Home Loan after Bankruptcy?
Fortunately, it is possible to get a home loan following a recent or past bankruptcy. If you are applying for a loan before re-establishing credit, contact at least four sub prime lenders and obtain online quotes. While the rates you receive will be high, you can always refinance in two years for a better rate.
If you have established new credit accounts, frequently check your credit report. If you pay your creditors on time and avoid late payments, your credit rating will improve considerably. After two years, begin contacting mortgage lenders. Likewise, you should also obtain several quotes. To speed up the process, apply through a mortgage brokerage site. A single online application will produce multiple quotes from many different lenders. That’s all for getting approved for a mortgage after bankruptcy.
