Buying a Home With Bankruptcy Or a Foreclosure on Your Credit

There is no doubt that filing bankruptcy or going through foreclosure leaves a big dent on your credit history and has a negative impact on your ability to borrow money. The period between bankruptcy filings is seven years, but the dent to your credit report stays for 10 years. However, the fact is that buying a home after bankruptcy is possible within 1 to 2 years if you carefully start re-establishing your credit and start rebuilding your credit worthiness.

Keep in mind that in order to build credit, you need to acquire and use credit. Lenders want to see that you can handle and maintain your credit after having filed bankruptcy. The key is to improve your qualification for a conforming loan. Here is how you can do that.

1) Clean Up Your Credit Report

Get a copy of your credit report and review it thoroughly. You need to clean up your credit report: find out if you have any serious mistakes on your credit report and have those corrected. Since your credit score is based on information in your credit report, and the credit report is what lenders base their decisions on, it is imperative that it be free from any errors and mistakes. Look for incorrect and out-of-date information. This can include, but is not limited to:

• incorrect or incomplete personal information (your name, address, phone number, birthdate, Social Security number)
• employment information
• incorrect payment histories (late payments listed when you paid on time)
• any old closed accounts that are currently listed as open
• any accounts that are not yours
• any accounts that were wiped out in the bankruptcy but are not listed as such - they should be properly reported as "included in bankruptcy"

Once you clean up your credit report, it is time to start rebuilding your credit.

2) Get a Credit Card

Obtain a major credit card. Creditors like to see evidence in your credit report that you have a history of paying off credit on time. Once you acquire a credit card, try to use it every month. Pay all bills completely on time. This will save any interest payments on your credit card spending. Light, regular use of a credit card is what helps build your credit - do not max out your credit limit - that will hurt your credit score.

It may seem that it will be quite impossible to get a credit card after bankruptcy, but it is easier than you would think: Filing bankruptcy gives you a 'fresh start' and the lender knows that you have no debt. The lender also knows that you cannot file bankruptcy again for another 7 years.

However, if you are having trouble getting a credit card, it would be wise to apply for a secured credit card, which gives you a credit limit that's equal to an amount you deposit at the issuing bank.

3) Show Positive Information

The lender wants to see stability. It will be good to show steady employment on the job for one to two years and earn a regular salary.

4) Make a Good-Sized Down Payment

You should save a down payment of at least 10% - this shows that you are serious about buying a home and you are willing to invest a lot of your own money in order to do so. It will also help reduce the rates you will receive even with your bad credit.

5) Make ALL Payments On Time ALL The Time!

Last, but not the least, make ALL payments on time. This includes telephone, cellphone, utility, credit card, and mortgage payments. This will show lender that that you are less of a credit risk now.

Follow the above steps and you will be on your way to buying a home. But do remember - is is not an easy road to follow. But it is not an impossible path. You may end up paying more in monthly installments than someone with better credit but you will be on your way to buying a home.

Buying a home after bankruptcy is possible but you will just end up paying more than a borrower who has good credit. Find many bad credit lenders at Credit And Mortgage Index.

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