While a bankruptcy stays on your credit file for 10 years, you are able to get new credit before that period is over. However, getting credit after a bankruptcy discharge, which signals the end of a bankruptcy, is not easy.
Secured Credit Card
Once your bankruptcy has been discharged, you should attempt to reestablish your credit. Wait two months after the bankruptcy and then apply for a secured credit card with a bank. A secured credit card requires a deposit, and the amount of your credit limit is determined by the amount of money you have on deposit. Your interest rate will be a lot higher than a standard credit card rate because of the assumed risk to the lender. But this new credit will be reported on your credit report and, as long as you've made your payments on time, it will have a favorable impact. Eventually, you will see improvements in your credit score. After paying on this account for one and a half to two years, some credit card companies will allow you to have an unsecured credit card. Don't be in a hurry to put a lot of debt of this card. Focus instead on making payments on time.
Car Loan
You probably will be able to get a car loan after a bankruptcy discharge; an automobile financing company is willing to take a chance because they can always repossess the car if you default. But, once again, your interest rate will be higher because of the bankruptcy and the lender might add a fee as well. After you have made timely payments on your auto loan for a year and a half, you may want to see if you can get it refinanced. A lower rate of interest will save you a lot of money in finance charges over the life of the loan. There are also some sub-prime lenders that specialize in these types of high-interest loans.
Mortgage Loan
After you have reestablished credit with a credit card company and an automobile loan, consider a mortgage loan. It's difficult to get a good rate on a mortgage loan after a bankruptcy discharge, even after you have reestablished your credit, so it might be a good idea to have two secured credit cards on which you have made on-time payments before applying for a mortgage loan. This can help increase your credit score, which mortgage lenders use in the approval process and to determine your interest rate. After two years of on-time payments, you might be able to refinance with a lower rate of interest, which could save you thousands of dollars over the term of the mortgage loan.
Home Equity Loan
If you are approved for a mortgage loan, eventually you will be able to qualify for home equity loans and home equity lines of credit. These types of loans should be your long-term goal, because you don't want to start with too much credit, which might lead you back to the same scenario from which you're trying to recover.
Time Frame
Most creditors will not extend any type of unsecured debt, which is debt that does not require security or collateral, for three to four years after a bankruptcy discharge. But as damaging as a bankruptcy can be to your credit, it can be repaired over time.
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