You’ve filed a bankruptcy in Georgia, and now you want to settle down and purchase a house. Contrary to popular belief, filing bankruptcy is not going to destroy your credit for life. While it is true that filing for bankruptcy will ding your credit to the tune of about 150 points, you will begin to receive credit card offers from lenders soon after you receive your discharge. Why, you ask? Because if you receive a discharge under Chapter 7, you cannot receive another discharge to wipe out your debts for another 8 years. Taking a credit card offer is not always the best option for someone who just got out of debt, so only apply for a credit card if you have the discipline to pay off the balance in full every month. Here are a few things you can do to reestablish your credit to qualify for a mortgage at a decent rate:
1. Pay Your Bills on Time
This is the most important step you can take in rebuilding your credit after bankruptcy. Rent, utilities, and any payments you may continue to have throughout your bankruptcy, such as your home mortgage and car note, should always be paid on time. I recommend setting up automatic payment deductions for all expenses so you don’t even have to think about it. Payment history is one of the most important factors in determining your FICO score, so never make a late payment.
2. Take a Credit Card Offer, ON ONE CONDITION!
Everyone falls on hard times, and after bankruptcy, you will have credit card offers coming in the mail. If you absolutely know that you will pay off the balance in full every single month, then apply and use this to your advantage. This is a quick way to rebuild your credit after filing a Georgia bankruptcy. I recommend charging only one item per month on this card in the beginning, such as your cable bill or your car’s gas usage. If you pay it off in full every month, charge a little more.
3. Cash is King
If you want to purchase a house, cash will always be king, and saving up for a 20% down payment will make it much easier to qualify for a mortgage with an interest rate you can afford.
4. Verify Your Credit Report
Four months after your bankruptcy case closes, check your credit report to ensure that any pre-bankruptcy charges are still includes and talk with your attorney about disputing them.
5. Get a Second Card
If you prove to yourself that you can pay off the entire balance on the first card at the end of each month, apply for a second credit card and do the same.
Rountree Leitman Klein & Geer, LLC's blog is a resource provided to clients, prospective clients, and colleagues that discusses issues related to Personal Bankruptcy, Business Bankruptcy, Collections, and Litigation.