Filing for bankruptcy used to be associated with inescapable poor credit and long-term financial insecurity. But online services, tools and other options now make it easier to improve credit after bankruptcy and make a home purchase more possible.
If you are considering a home purchase, you must first improve your credit score. While a bankruptcy will not be removed from a credit report for six to seven years, there are ways to make your score more competitive.
On-time payment and credit utilization are the two major factors affecting credit scores. You can begin to address these by obtaining a secured credit card or focus on student loans or other loans that were not resolved in the bankruptcy.
A secured credit card is different than a typical credit card. Holders deposit money into it and then may borrow against the card to make purchases. This lowers available credit. Secured credit cards demonstrate that changes are being made to how credit cards are handled and can quickly increase credit scores.
Liquidating assets after bankruptcy helps with the home purchase. Selling vehicles, furniture, electronics, and other high value assets can help restore your finances and free up cash to rebuild credit.
But try to avoid liquidating appreciating assets which have value over time and can help with the down payment on your new home. As an alternative, begin by selling depreciating assets that are unused or unneeded. These proceeds can constitute savings that may be put down on a home quickly without incurring excessive debt.
The government provides another option if you cannot qualify for a traditional loan or credit card. It provides low-interest loans for consumers who have financial struggles.
The Home Affordable Modification Program and the New Homeowner’s Assistance Program are among the government programs that provide loan modification that can help reduce monthly loan payments. Sometimes, these programs provide grants for lowering a down payment or closing costs.
Attorneys assist clients throughout the bankruptcy process when debt becomes overwhelming. They can also help them make a fresh start and rebuild their credit.