Blog

» Back to All Categories or Legal Tips

Rebuilding Credit

Clients are often interested in how they can rebuild credit after filing for bankruptcy. Although the credit report will generally reflect the filing of the bankruptcy for 10 years, it is a complete misconception that clients will not be able to obtain credit during this 10 year period.

Please be wary of companies selling instant credit repair services. There is no magical way to rebuild credit. If you are told otherwise, you are likely dealing with a scam artist.

After receiving a discharge in bankruptcy, clients’ credit scores will improve over time, especially if no further derogatory information is reported to the credit bureaus. Maintaining regular payments on debt that survives the bankruptcy case can elevate the credit score. Secured credit cards also help, if clients pay off the full balance each month. Steady employment and living at the same address for extended time periods can benefit the credit score.

Lenders will take a more favorable view of a person who has discharged indebtedness in bankruptcy, as opposed to an individual who is burdened with insurmountable debt. Post-bankruptcy clients have greatly decreased their debt-to-income ratios, and therefore the prospective lender will not need to compete with other creditors to be repaid. The lender will also be aware that Chapter 7 bankruptcy can only be filed once every 8 years.

Mortgages can be obtained by clients after filing for bankruptcy. The minimum waiting period for an FHA loan is currently 2 years.

For further information about rebuilding credit after bankruptcy, please feel free to contact us directly.

Peter Berk