Rebuilding Credit After Bankruptcy

After bankruptcy, frequent questions we hear from our clients are “How do I rebuild credit after bankruptcy?” “Will I be able to buy a car or a house?” “What if I need a credit card to buy airline tickets to go visit my sister?”

Remember that THERE IS NO NEED TO WAIT ANY LENGTH OF TIME TO TRY AND REBUILD YOUR CREDIT!

Here are a few ideas to help you get started in rebuilding your credit.

1. Obtain a secured credit card. Many banks allow you to place a nominal amount in a savings account at their bank (It could be as little as $100.00). These accounts are designed for persons who have poor credit scores and for people who have recently filed for bankruptcy. You may have a credit limit issued for double or triple the amount you have deposited. When you charge things on the credit card and make on time payments, your credit score will improve. You can also compare credit card interest rates as well at Creditcards.com or Cardratings.com. I have also heard that Orchard Bank caters to persons who have filed bankruptcy and issues a credit card at little cost to help you rebuild your credit.
2. Car Loans. Even if you have gone through bankruptcy you may still obtain an automobile loan. It will most likely be at a high interest rate. Many lenders will allow you to refinance at a lower rate once your credit improves. Some of the requirements lenders request are:
   1. A minimum $1,500 gross monthly income is required for credit scores under 652.
   2. For Chapter 7 Bankruptcy, a few lenders require the 341 meeting of creditors to be completed. Most lenders require that there be a discharge. In our experience most automobile dealers have finance specialists that help persons who have filed bankruptcy.
   3. For Chapter 13 Bankruptcy, an Authorization to Incur Debt from the trustee is required. However, in our experience trustees will most likely give approval as they know you need an automobile to work. Obviously they are more likely to approve you purchasing a Saturn than a Lexus.
   4. There must be no auto loan repossessions within the last year unless they were included as part of the Bankruptcy.
   5. You must be a U.S. resident who is at least eighteen years of age with a valid driver’s license.
3. Mortgages. Once you have been discharged from a Chapter 7 bankruptcy, generally you must wait two years to apply for a mortgage. This is a requirement of the FHA guidelines. Many lenders require that you have steady employment for two years and a low debt ratio as compared to your income. After bankruptcy most people’s debt ratio improves!
4. Make payments on time. It is important to make payments on time, even if you only make the minimum payment. Only apply for new credit when you can manage your finances successfully. When you file for bankruptcy, with us, we are aware of your budget and we can offer suggestions as what you may be able to afford.
5. Dispute mistakes in your credit report. After a bankruptcy, if your credit report, for example, lists an account as “open” and “overdue” the report should be corrected to “included in the bankruptcy.” We can assist you in reviewing and correcting your credit reports after the bankruptcy process.

   We want to assist you through the bankruptcy process and hopefully, thereafter help to guide you through the process of improving your credit! Contact us today toll-free at 800-365-6666.