Bankruptcy damages your credit. Everyone knows that. But, according to the Moran Law Group; “Those considering bankruptcy frequently worry that they will never get credit after a bankruptcy, or that it will be 10 years before they can get credit. Neither is true.” So what exactly is your credit like after bankruptcy?
Credit after bankruptcy is not as bad as many people believe. Since individuals that end up declaring bankruptcy usually have many late payments before bankruptcy, their credit after they file for bankruptcy is often better than it was before. Objectively, someone who has just declared bankruptcy, and had all their debts discharged, is a much lower credit risk than someone who is behind on some payments and has defaulted on others.
Can I ever achieve good credit again?
Of course. In fact, you can achieve perfect credit in the future, since a bankruptcy is taken off your credit after ten years. Many people make a big deal about the fact that it remains on your credit for so long, but any negative record that is added to your credit report remains on your record for seven years, so the ten that a bankruptcy lasts isn’t really that much longer, and you no longer have your outstanding payments. Obtain credit cautiously, and make your payments regularly and on time to avoid these problems.
Can I use a credit card?
Yes. Today’s competitive lending environment ensures that just about anyone can obtain loans and credit cards, even with poor credit after bankruptcy. In fact, you may be able to keep one of the cards you had before bankruptcy, if you didn’t have unmet payments on it at the time of bankruptcy. You are under no obligation to notify them of your bankruptcy. Chances are; you will find that it’s not hard to obtain credit after bankruptcy, and that the credit card companies are soliciting your business just like always. Your interest rate may be higher, but if you don’t carry a balance (a good financial strategy!) it won’t matter. Making your credit card payments regularly is one of the best ways to repair your credit.
Can I buy a home?
You can certainly buy a home — the main problem will be getting a reasonable interest rate after your bankruptcy. However, if you wait for a couple of years after the bankruptcy, your rate may not be affected all that much. Studies show that 18-24 months after a bankruptcy discharge, you can qualify for a loan on the same terms as if you had not filed bankruptcy. You can also improve your ability to get a good mortgage by convincing someone with good credit to co-sign on the loan with you.
Credit repair steps:
You can dispute any inaccurate information that appears on your credit report. The credit reporting agency will investigate, and make any needed changes within thirty days. You may even want to contact a credit counseling service. Many of these are non-profit organizations provided by your state. They can help you repair your credit, and also help you repair the behaviors that damaged your credit in the first place.
Since bankruptcies do stay on your credit report for ten years, the best strategy, of course, is avoiding bankruptcy entirely. Credit counseling agencies can help you with that, if declaring bankruptcy is something you’ve been considering. But if you’ve already declared bankruptcy, your situation is by no means as hopeless as you probably believe. You can still obtain credit, and your credit after bankruptcy is by no means irreparable.
By Riannon Cutler