How to rebuild your credit after Bankruptcy?

It is a heartening news that even bankrupt people are also provided with fresh credit for acquiring homes.

However, such credit comes with a high interest rate and with lesser quantum of loan amount, the reason being that the bankrupt people are categorised as high-risk borrowers. And the credit is also closely supervised and monitored.

Though Bankruptcy can relieve the person form all his obligations of loan repayment, a bankruptcy status will sit on one’s credit rating for at least 10 years and you may have to take the subsequent credit cautiously and use it devotedly.

A person who filed bankruptcy earlier will be able to get further loans at a higher rate of interest because of the risk involved in lending to such person. The difference in rate of interest may even go up to 2 percent on the higher side.

However, if you choose to pay off your small time liabilities such as credit card liability and small loans, you stand a better chance to improve your credit rating with your lender to a significant level.

The first and foremost point is that you should put forth all your efforts to establish a good credit rating after bankruptcy and it is essential to give importance to things such as:

• Paying your bills in time

• Acquiring secured or unsecured credit card

• Restricting your expenditure to well within your capabilities

• Closely monitor all your credit needs and achieve a better credit report

Lenders who lend further credit to a bankrupt person normally look for three main things before venturing out. They are:

1. They look for unblemished repayment record, at least for the past two years. By ensuring such repayment, they come to a conclusion that you have got the intention to repay with a regular income.

2. Lender always looks for down payment to reduce their exposure to credit.

3. They expect a steady income and the same should be sufficient to service the proposed loan as well as other existing disclosed liabilities.

Getting a home loan after filing bankruptcy is no longer a problem as there are special loan packages and very flexible terms for those who have filed bankruptcy in the past.

Bankruptcy is not a limiting factor for a lender to lend money to a person who has filed bankruptcy earlier, as the asset or the home is taken as collateral security for obvious reasons.

To summarise, work hard to make extra money in your spare time so as to have a better cash flow, start doing some freelance work, if possible start a profitable business.

Try to make more money to meet the down payment requirement as this particular area immediately boosts your credit rating and the chances of your getting your loan approved will get increased dramatically.

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