If you have ever filed for bankruptcy, it is possible that you are wondering what will happen with your credit. It is not possible to open a new credit account right away. However, there are other ways to rebuild your credit. Whether you're looking for a new credit card, or looking to save your home, you can rebuild your credit after bankruptcy.
Rebuilding your credit score after bankruptcy
If you follow the correct steps, bankruptcy filings will greatly improve your credit score. Pay your monthly debts on time. This is critical as your payment history contributes 35 percent to your FICO score. Your score will also increase if you have positive financial habits. Credit cards should not be used for all your expenses. Instead, pick one bill you can afford to pay in full each month. Once you feel comfortable with the process, you can apply for credit accounts.
FICO scores can be affected by credit card debt. If you have a high balance, you should reduce usage. To avoid getting into debt in the future, you should start saving for an emergency fund.
Recovering from bankruptcy by getting a credit card
Before you can apply for a new card, make sure you have paid off all your debts. You can experience a decrease in your credit score if you file for bankruptcy. The process of getting your debt discharged will take anywhere from six months up to five years. There are two options: chapter 7 bankruptcy or chapter 13. This will wipe out most of your debt. Chapter 13, also known as a wage earning plan, requires you make monthly payments based off your income.
After you have paid off your debts, it is time to rebuild your credit rating. This is crucial if you ever hope to get a mortgage or car loan. Your options with credit cards will be limited if your bankruptcy is filed. It is vital to read all terms and conditions before you sign any card. This will help to protect your credit score.
Saving your home after bankruptcy
Refinancing a mortgage after bankruptcy can help you save your home. Be aware of the risks and options before making a major decision. First, you should know that you will likely have a difficult time getting a mortgage after bankruptcy. You must also be ready to spend a lot on home maintenance such as landscaping, pest control and snow removal. It can be costly, so it is important to plan ahead.
If you're facing foreclosure, Chapter 13 bankruptcy is a good option. While you are working on a payment program, collection activity will be stopped by filing for Chapter 13.