There is no denying a bankruptcy can devastate your credit rating. When you file a bankruptcy, every credit account that you decide to include will become an "included in bankruptcy" account. Additionally, a bankruptcy filing and discharge listing will appear in the court records section of your credit report. Because so many negative items are attached to the bankruptcy, it becomes extremely difficult to remove all traces. Remember, a bankruptcy usually stays on your credit report for ten years.
If you think a bankruptcy will adversely affect your credit report and the ability for you to secure new credit, then you're right. A bankruptcy can stay with you up to ten years and is a red flag to future lenders that you have had trouble managing your finances in the past.
However, the negative credit effects of a bankruptcy can, over time, be corrected. With a little patience, attention to detail and a bit of credit know-how, a good credit report can be rebuilt.
Refinancing/Home Equity Loan
Once your bankruptcy has been discharged, you will find that it's much easier to get a secured loan. This is especially true with a home loan. Depending on your past payment history and the value of your property, you should be able to qualify to refinance your mortgage or procure a home equity loan. However, you should be aware that your lender will probably require an elevated interest rate and a lower loan-to-value to make up for your high-risk credit history.
It may be in your best interest to spend a year or so to re-establishing your credit before attempting a home loan. The more time that has passed since your bankruptcy and the better your credit, the more likely you are to get a reasonable loan.
1. Form a Workable Budget - Understanding the flow of your personal finances, what is going out and what is coming in, will give you a better feel for why some of your money is slipping through the cracks. With this information, you can make informed decisions on the best ways to use your hard-earned cash.
2. Check Out Your Credit Report - A few months after your bankruptcy has been discharged, order copies of your credit report from all three major credit reporting agencies and look them over carefully. Verify that the information is correct and that all the debts included in your bankruptcy show up that way.
3. Make Sure Your Bills are Paid on Time - Many banks now offer Internet services that automatically transfer money from your checking account to your creditors at a set time each month. Timely payments look good on a credit report. Don't overlook the telephone and utility companies. Some of them now report late payments to the credit bureaus.
4. Re-establish New Credit Cards - It's ironic that the credit, which causes people to get into financial trouble, is the same type needed to rebuild good credit reputations. Initially it may be easier to get a secured credit card, but after a year of good history, you may be able to negotiate an unsecured card. Only use the card for expenses you can pay off at the end of each month, and don't apply for more than one or two. Maxed-out credit cards and frequent credit applications will hurt rather than help your new credit.
Don't Get Discouraged
In some ways you are a better credit risk after a bankruptcy. With no substantial debt and the guarantee that you can't declare bankruptcy for at least six years, you may be surprised how many lenders are willing to give you a chance.
If you've already filed for bankruptcy
There is hope. Thousands of consumers have learned firsthand how legitimate credit repair firms are a money saving solution to their credit history problems. By disputing items that are inaccurate, unverifiable or misleading, legitimate credit repair firms can work to remove bankruptcies from credit reports.
Lexington Law Firm has helped over ½ million clients repair their credit reports since 1991. At Lexington, a staff of lawyers is dedicated to creating a fusion of strict regulatory compliance with innovative solutions for repairing credit reports. In 2009 Lexington legally deleted 1,013,469 negative credit items from their customer's credit reports. This number includes an amazing total of 9,713 bankruptcies.
In accordance with federal regulations, Lexington Law Firm charges retroactively for services performed each month, and the consumer may cancel at any time. Lexington's experienced attorneys are ready to provide quality services at affordable rates. So why wait?
When considering Bankruptcy you want to know that you are making the right choice. An experienced bankruptcy attorney in your area is available to assist you.