Filing bankruptcy is never easy, it’s a hard decision to make and then you need to recover – especially if you want to buy a home! Here are some steps to take to make sure your credit recovers so you can buy a home!
- The most important thing to do is monitor your credit. There are many sites you can use to look at your credit report. Credit Karma is one, annual credit report is another. Many banks and credit cards offer free credit reports. Make sure you are looking at all three bureaus – not every creditor reports to all three bureaus and you want to make sure your report is accurate.
- Re-establish your credit. There are many credit repair companies out there and many are scams. You need time to recover and start slow – first step is to open a credit card. You may need a secure card, that’s ok – just make sure they report to the credit bureaus. Check with your bank or credit union, they may have a program for you to start repairing your credit. Make sure you keep your balance at about a third of the available credit. So if your credit line is $500, keep your balance at or under $200. Pay it off every month so you are not paying interest. Make sure you pay on time – the last thing you want after a bankruptcy is a late payment on your credit report. Once you are able, take out a second account – maybe a small car loan or line of credit. Again – make sure they report to the credit bureau and keep all your payments on time.
- Avoid high interest accounts. That car you want is not worth it if the interest rate is really high – all you are doing is putting yourself closer to credit issues. Same with credit cards – but if you pay off the balance monthly, then you are not paying interest and you are rebuilding your credit.
- Save money. Work on a savings account. Even small amounts will add up over time. Try to establish a savings account with about three months of expenses in it. That way if you have an emergency, you will have the money to pay for it. Another suggestion is if you are looking at buying a home and currently are paying less in rent (or maybe living rent free with family), put aside the money you would be spending on a house payment. If your rent is $500 and you expect a $1000 house payment (or more), put the extra $500 into a savings account. That way you are building up an emergency fund, but you are also saving for the down payment on a house. When you find that home, you will be used to putting money aside for an emergency.
Don’t give up. It takes time to re-establish your credit. You didn’t get into the financial bind that made you file bankruptcy over night and it will take time to fix your credit, but it will happen. Typically it takes about 2 years after your bankruptcy discharge to be able to buy a new home. Use that time to improve your credit and save money. That way when the time comes, you will be ready!
If you have questions on any of this, let me know. I’m more than happy to set up a time to go over your situation and help you start on the path to home ownership!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
