You may think that recovering from bankruptcy is impossible, as your credit score goes down and many lenders will not extend credit to you. Yet, bankruptcies don't last forever and, with time, you can boost your poor credit rating and fully recover.
Bankruptcies and Credit Reports
Bankruptcies are unlike other types of negative information on credit reports, such as foreclosures and collection accounts. These types of information stay on reports for a period of seven years, whereas a bankruptcy can tarnish your credit report for 10 years. Recovery soon after a bankruptcy discharge is crucial to improving your credit score. If you don't take steps to fix a bad credit rating, this can result in credit rejections or higher interest rates until the bankruptcy falls off your credit report.
Reaffirming Debts
Reaffirming a debt in a bankruptcy involves you excluding a particular creditor and debt from a bankruptcy filing, and continuing to pay the account as agreed. Common debts that you may reaffirm include mortgage loans, auto loans and student loans. Reaffirming debt helps put you on the path to recovery. While a bankruptcy court may wipe out your other debts, which results in a reduced credit rating, if you make payments every month on your reaffirmed debts, this will slowly improve your credit rating and help reverse the effects of a bankruptcy.
Opening New Accounts
When a bankruptcy eliminates all your outstanding debts, opening new credit accounts and practicing better account management is imperative to recovery. Because some lenders will not consider your application for credit, look for creditors and lenders that work with sub-prime borrowers, which include those with recent bankruptcies. Apply at your bank for a high-interest rate credit card or a secured credit card that requires a security deposit. Get a high-interest rate auto loan, or apply for a small personal loan using personal property as collateral. Pay these creditors on time and pay off credit card balances each month to keep debts manageable.
Rate of Recovery
The amount of time varies in which you improve your credit after bankruptcy, and depends on the number of accounts you hold and the way you manage your credit. Starting the improvement process immediately after a bankruptcy discharge, and adhering to good credit habits, can help you qualify for a mortgage loan within 18 to 24 months, according to the Moran Law Group.
0 comments:
Post a Comment