By carefully rebuilding your credit you can qualify for almost-normal rates, even a mortgage, in a year or two.
Almost anyone can get credit soon after a bankruptcy. It is just a matter of knowing how. Bankruptcy deals a devastating blow to your credit and your credit score, the three-digit number lenders use to gauge your creditworthiness. But the effects do not have to be lasting. Long before the bankruptcy drops off your credit report, you could be qualifying for loans with good rates and terms.
What Do I Need To Know About Bankruptcy
If you are a recent bankrupt, here are two things you need to keep in mind:
Nothing in credit is "forever." A bankruptcy legally can remain on your credit report for up to 10 years, but its effect on your credit score can start to diminish the day your case is closed - if you adopt responsible credit habits such as paying your bills on time, using only a small portion of your available credit and not applying for too much credit at once.
You have to get and use credit to build your credit score. Living on a cash-only basis may be a smart choice for those who really can't handle credit. But if you want to rebuild your credit score, you can not sit on the sidelines.
Only File Bankruptcy Once - Twice Is Expensive And 20 Years Of My Life
Although repeat bankrupts show that getting credit after a Chapter 7 or 13 filing is possible, you should not want to emulate those who file more than once. At first glance, people who file more than one bankruptcy seem to be beating the system: they run up big bills and then walk away.
Multiple bankruptcies are really defeating themselves. Their debts and credit history often mean they are paying out big bucks in high interest payments during the time when they're prohibited from filing another bankruptcy.
The 2005 bankruptcy law provides that, under Chapter 7, eight years must elapse before you can re-file. If you go for Chapter 13 after a Chapter 7, you must wait four years. Going from one Chapter 13 to another, two years must elapse. However, recently bankruptcy laws were changed to make it more difficult for people to file bankruptcy and especially for those people who simply do not want to pay their bills or are repeating filers of bankruptcy.
And most people can not file for Chapter 7 liquidation if they have significant assets to protect, such as home equity or savings. So these folks who are repeatedly going broke often have little to show for all the money that is leaving their pockets. Instead of building wealth over time, they are losing ground.
Instead, use your bankruptcy as a wake-up call to figure out what is wrong with your finances and fix it. If your problem was overspending, seek advice about creating and sticking to a budget.
If you did not have enough savings to survive a job loss or other setback, get serious about establishing an emergency fund.
If you were sunk by medical bills, seek a job with insurance coverage or check to see if your state offers coverage.
How To Repair My Credit Report
Check your credit report and if the reports still show several accounts as open and overdue when, in fact, they were closed and the obligations wiped out as part of your bankruptcy, you need to contact the credit bureaus and insist that those accounts be properly reported as "included in bankruptcy."
If you have other serious mistakes on your credit report, those need to be corrected as well. Your credit score is based on information in your credit report, so errors on your report can seriously dampen your score.
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