You bit the bullet and filed for a Chapter 7. Now you have your discharge and you are beginning again. The question many with a recent chapter 7 or 13 bankruptcy have is: can I get a mortgage sooner than the ten years the bankruptcy is reported as part of my credit file?
It all depends on you. If you manage your finances appropriately, pay your bills on time, spend responsibly and begin to save a respectable portion of your monthly income you can rebuild your credit fairly quickly. You can typically get a FHA or a conventional mortgage within two years after your discharge as long as you have maintained good credit habits during the two years.
So what do you have to do to rebuild and maintain a good credit score? There are a number of actions you need to take.
Most importantly make sure the benefits of the bankruptcy discharge are correctly reflected in your credit report. All the debts discharged in your bankruptcy should no longer be reflected on your credit report as open or late. Check your credit report every thirty days after your discharge and be prepared to provide documentation of your discharge to creditors who are still reporting your debt to them as open or late.
Keep good records of who you speak with at the creditor’s offices and copies of all correspondence sent to your creditors regarding debts that are being inappropriately reported to the credit agencies. It may take several follow up conversations and multiple letters to get everything reported correctly to the credit rating agencies. This process can be frustrating but follow through, it is worth it.
Second pay all your current debts on time. This includes utilities, student loans or other debts or loans that you chose to reaffirm or that were not discharged in your bankruptcy. Try to put a little extra each month toward paying off these debts and loans.
Third, to the extent possible maintain a stable employment history. Getting a better paying job may improve your credit worthiness but changing jobs every few months or going for a period of time without a job is seen as a credit risk. Any time you apply for a mortgage a stable employment history is a plus.
Fourth, establish a savings account and put money into the account each month. When you apply for a home mortgage you will need a down payment. 20% of the value of the home is typical. You may be able to get a mortgage with a smaller down payment but the more you can save the better.
It will also help rebuild your credit if you obtain a credit card. You will probably have to get a secured credit card to start with. Use it sparing and pay off the balance every month. If you pay off the balance each month and keep the debt to credit limit ratio low it will help rebuild your credit score.
If you follow these recommendations you may be able to find a mortgage lender who will consider you for a mortgage as quickly as two years after your discharge.