Over 1 million people file for personal bankruptcy each year. Unanticipated medical bills are a leading cause of personal bankruptcy. Other factors include job loss, divorce and high mortgage debt, and of course credit card over spending. Even though bankruptcy will remain on your credit record for up to 10 years, you can still bounce back and reestablish a good credit rating. Unfortunate circumstances in your life have caused you to seek bankruptcy protection but it doesn't mean that your financial life is ruined. After having your debts discharged by the bankruptcy court, you can still qualify for a car loan with reasonable interest rates one year after filing for bankruptcy and a mortgage in two to four years. If you are cautious you can reestablish creditworthiness. Consider the following proactive steps:
1. Obtain a credit card-Get a low interest card and accept a spending limit as low as $250.00. Check out a "secured" car which allows the bank to make deductions from a savings account if you don't pay what you owe. Look at website Bankrate.com to find the best terms. Make sure that the card issue will report your new payment history to the three main credit-rating agencies so you can establish a record of paying back debts reliably. Even after filing for bankruptcy, card issuers will be vying for your business because after filing you are a great credit risk since you have no debt and cannot refile again for bankruptcy for as much as eight years.
2. Keep new Payments current: Avoid even a single late payment on new accounts because late payments can often influence your credit rating by 40 to 90 points. In contrast, paying off debt quickly not only rebuilds your creditworthiness, it also helps you avoid high interest charges.
3. Request Lower rates as Your Credit Recovers. It may take a full year of timely payments, but gradually your rates will be reduced. Some lenders make these adjustment automatically. You still have the option, however, to inquire from lenders who will offer you the best post bankruptcy rates.
4, The "credit repair" myth: Some companies use the internet and other advertising vehicles to offer consumers to fix bad credit in a short period of time for a fee. These companies send try to manipulate the system and their calls to credit-scoring agencies do more damage than good. While they can cause your delinquencies to be delisted temporarily, the can ultimately be added back to your credit report.
5. Next Step is to finance a Car: While car dealers typically wasn't to see at least a year of good payment history before financing a post bankruptcy buyer, some dealers are more aggressive particularly in light of the new government stimulus programs. Initial rates can be as high as 22%, but reliable payers can refinance at better terms later on. And, opting for a used car can keep costs down.
6. Maintain reasonable balances: Post bankruptcy borrowers who seem to be handling new debt well will find that their credit limits increase rapidly. Keep low limits on your new cards and try not to over extend yourself.
7. Plan for a Mortgage: Some of the biggest home loan programs won't consider borrowers who have filed for bankruptcy in the previous four years. Loans guaranteed by the Federal Housing Administration often prove the fastest pat back to home ownership, usually with a two year wait after bankruptcy. Banks trying to sell foreclose properties may also be more flexible.