Filing for bankruptcy can help you start over fresh with your finances, but it can also leave you with poor credit. If you filed bankruptcy recently and want to buy a house, getting a home loan might be difficult at first. Over time, though, you should have no problem qualifying for a home loan if you manage your finances well. Here are some tips to help you qualify for a home loan faster after filing for bankruptcy.
Immediately Begin Working On Your Credit
The best thing you could do after filing for bankruptcy is to begin working on your credit score. Your credit score could drop by 160 to 220 points after you file. The actual amount will depend on how poor your credit was before you filed. About a month after you file for bankruptcy, you may want to pull a credit report to find out what your credit report looks like. From there, you can begin rebuilding your credit by doing the following things:
- Disputing any errors – If there is anything wrong on your credit report that is pulling your score down, fight it. The credit bureaus must investigate every dispute they receive, and you may be able to boost your score simply by getting inaccuracies removed from your report.
- Using credit cards – It will be hard to get a regular credit card after bankruptcy, but you will be able to get a secured card. When you get it, begin using it and paying it off in full each month. This will build a positive payment history, which will cause your score to improve.
- Taking an installment loan – An installment loan that is reported to your credit report will also help you build positive payment history. You may need to put money in a bank to get an installment loan, but the loan will still be reported each month.
There are other steps you can also take, but these are the best ways to increase your credit score faster.
Stay Out Of Debt And Pay Every Bill On Time
The huge benefit of bankruptcy is that it will wipe out all unsecured debts you have. You will no longer owe medical bills or credit card balances, which means you will have more cash to use for other things. This can be beneficial if you use your money wisely after you file. Using it wisely should involve saving some of it and avoiding debt. If you choose to have a credit card to build your credit score, you must make sure you pay off the balance every month. You should also take special precautions to make sure you can pay every bill you owe on time every single month.
Paying your bills in a timely manner, avoiding debt, and saving money are the three key principles that will help you prepare to buy a home after bankruptcy.
Wait For Two Years
While it might be possible to boost your credit score high enough in less time, waiting for two years after you file is generally the rule of thumb. Not only will you get a better interest rate on your home loan, but this will also give you time to save money for your down payment. Some loan programs do not require a large down payment, but there are some that do. Your options with loan programs will widen if you have a decent amount of money to put down.
If you would like to learn more about home loan programs for people who have filed bankruptcy, contact a lender in your area that specializes in loans for homes, like First Mortgage Company, Inc.