Will I ever get credit again?
Bankruptcy used to be a sort of scarlet letter that kept people from getting credit for years. No more. So many people are filing bankruptcy that banks cannot ignore this market anymore.
Most of our clients are offered credit right away, sometimes even before discharge. We encourage you to live on a cash basis, and use a debit card for reservations and internet purchases, and swear off credit cards.
But if you do plan to borrow for a home, car or other major purchases in the future you should be able to as long as you have a good income/debt ratio. Many of our clients borrow for a home within 1-2 years after bankruptcy.
- First, realize that your credit score is not destroyed forever by bankruptcy. If you have high debt your credit is not that strong now, even if you make on time payments. Lenders use Universal Default (a provision in your contract) to raise interest rates even on clients who have never missed a payment.
- Credit scores vary throughout your life based on your credit usage (no credit usage = low credit rating), on-time payments (on-time payments improve your rating), income to debt ratio (high debt = lower score), your income (higher income improves your score) and other factors such as employment stability (longer duration of employment = better credit).
So you can go to work right away to improve your credit score by:
- Making every payment on time;
- Keep your income to expense ratio favorable by not taking out a bunch of furniture or other loans, although some clients will take out a small loan after bankruptcy and pay it off on-time or early in an attempt to show creditworthiness after filing;
- Maintain stable employment;
- Save a substantial down payment if you intend to purchase a home, by saving money you show lenders that you have the ability to make the new payment;
But in the end we hope you will not go into bankruptcy with then goal of re-establishing your credit so that you can get back into the “buy now, pay later” mentality. If you can use your bankruptcy to stop using credit cards and use a debit card instead, your life will be much less stressful. Imagine never receiving a credit card bill again. You can do it!