Many borrowers who have become overwhelmed by their outstanding debt find it necessary to file bankruptcy, and you may be among those who have been forced to file bankruptcy in order to protect yourself from losing your home or other assets. Bankruptcy wields the hardest blow on your credit rating that you can imagine, but you can rebuild your financial future and get a loan after bankruptcy with a few smart moves. Qualifying for a loan after bankruptcy is not impossible, just a bit tricky.
Small Steps To Recover From Bankruptcy
The first step for any person who has just come out of bankruptcy and had their bankruptcy discharged should be to check your credit report and credit score. Legally, you are entitled to a free copy of your credit report from Trans Union, Equifax, and Experian, which are the three most widely recognized credit bureaus doing business in the United States. Review your reports for accuracy, and do not feel satisfied to view just one report because each of the three bureaus may have a different way of accounting for your previous credit history. Check to be sure that all accounts that were closed during bankruptcy are noted as such as open accounts and a bankruptcy will make your score drop even further.
Demonstrating Responsible Behavior
Your next step is to establish two banking accounts - one for checking and one for savings. These accounts do not report to the credit bureau or add points to your score, but your management of these types of accounts shows responsibility and the skills needed to handle money. Potential creditors like to see that you are capable of handling banking accounts.
You should then proceed to establish at least two secured credit card accounts. Having a credit card is a sure fire way to add points to your FICO credit score. The secured credit card account allows you to have access to a credit line that is equal to the deposit that you make with the bank or lending institution that issues the card. Start out small with perhaps two $1000 accounts until you have built your score up enough to get a traditional, unsecured credit card (usually about six months to a year after your bankruptcy is discharged). Run a thirty percent balance (in this case, around $300 or so)and make your payments in a timely manner without ever charging more than half of your available credit (in this case, no more than $500 per month).
Getting Your First Post-Bankruptcy Loan
Once you have paid on these two secured credit card accounts for awhile (around 6-18 months) you will find that you are ready to begin the process of getting your first post-bankruptcy loan. Start small with a small loan of less than $5,000 and pay it off within one year. Once you have passed this major hurdle, you will no doubt be able to qualify for bigger and more valuable loan products at great interest rates later on down the road, regardless of your past bankruptcy history.
