If you've filed for bankruptcy, you may be wondering what will happen to your credit afterward. It is not possible to open a new credit account right away. However, there are other ways to rebuild your credit. No matter if you're looking to open a new credit card or save your home, bankruptcy can help you rebuild your credit.
Rebuilding your credit score after bankruptcy
Your credit score will dramatically increase after filing for bankruptcy if you follow the right steps. Start by making your monthly payments on time. This is very important since your payment history makes up 35 percent of your FICO score. You also need to establish positive financial habits in order to increase your score. Avoid charging all of your expenses to credit cards. Choose one bill that you are able to afford each month. Once you're comfortable, you can open new credit accounts.
FICO scores will be affected by how much credit card debt you have. Reduce your usage of credit cards with high balances. To avoid any future debt, it is a good idea to open an emergency savings fund.
Getting a new credit card after bankruptcy
Before you apply after bankruptcy for a credit card, be certain that you have paid off your debts. A bankruptcy filing can negatively impact your credit score and take up to six months to five to discharge your debt. You have two options to file chapter 7 or Chapter 13 bankruptcy. This will get rid of most of the debt. Chapter 13 is also called a wage earner plan, and it requires you to make monthly payments based on your income.
After you have paid off your debts, it is time to rebuild your credit rating. This is essential if you hope to obtain a mortgage or a car loan. Bankruptcy will also limit your options when it comes to credit cards. You should carefully review the terms and conditions of each credit card to avoid any negative effects on your credit score.
Saving your home after bankruptcy
Refinancing a mortgage after bankruptcy can help you save your home. You should consider all options and the potential risks before making such a huge decision. You should be aware that it is likely that you won't be able to get a mortgage once you have filed for bankruptcy. In addition, you must be prepared to pay for a large amount of home maintenance, including landscaping, pest control, and snow removal. It can be costly, so it is important to plan ahead.
In addition, if you are facing foreclosure, you should file for Chapter 13 bankruptcy. You can file for Chapter 13 to stop collection activities against you and work out a payment plan.