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Bankruptcy may seem like an option to wipe your credit problem slate clean so you can start anew, but filing bankruptcy decreases your credit score and stays on your credit for up to ten years. This means every time a lender pulls your credit report to make a lending decision, they see you filed for bankruptcy, which can make it difficult to obtain mortgage financing. The good news is that there is still hope in obtaining a mortgage even after filing for bankruptcy. 3 Steps for Building Credit After Bankruptcy After a bankruptcy, you have to take a proactive approach to rebuilding your credit and improving your credit score. This shows lenders that you’re back in control of your finances. Rebuilding your credit is a process and one a process that may take years to truly accomplish. Don’t get frustrated though. If you’re persistent, the persistency pays off and puts you back in a position where you can obtain mortgage approval. 1. Build new credit. It’s important to apply for new credit as soon as possible. You may have to start small – applying for gas or department store credit accounts – and then progress into larger credit purchases such as vehicles and eventually a mortgage. You can also apply for a secured credit card from your bank, which leverages the amount of money you have deposited with the institution to extend you a credit card. 2. Repair bad credit. If you have late payments or no pay accounts, work on repairing these items. Contact the creditors or collection agencies you have negative items with (that were not part of the bankruptcy) to make payment or payoff arrangements to clear these items up and remove them from your credit report. 3. Increase your credit score. Several factors go into calculating your credit score. The number one factor in calculating your credit score is making your payments on time, so always make payments on or before the due dates. Other ways to increase a credit score is to keep good longstanding relationships with creditors, have a mixture credit account types and obtain new credit from time to time. While a bankruptcy may seem equivalent to wearing a Scarlet Letter, there are proactive steps you can take to get your credit back on track. It illustrates to creditors such as mortgage lenders that you are all about regaining control of your finances and a worthy credit risk. About the Author Kristie Lorette is a freelance writer and marketing consultant that specializes in personal finance. She is also the editor of The Mortgage & Credit Diva, a blog devoted to mortgage and personal finance tips, tricks, and advice for consumers. You can read Kristie’s blog at www.mortgageandcreditdiva.blogspot.com or learn more about her writing and marketing services at www.studiokwriting.com
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