Road to Homeownership: Repairing Credit After Bankruptcy
Declaring bankruptcy is a serious business, but it’s one that Canada – and the Province of Ontario- allows for the “poor and unfortunate debtor” to find a way out and obtain “rehabilitation” from crippling debts. If a person already owns a home prior to doing so there are often ways that they can actually keep it, but for those who were yet to buy their own home, a bankruptcy can seem like it will spell the end of their homeownership dreams.
Once a person has declared bankruptcy they often think that they will never even be able to gain access to credit again and that the chances of ever owning their own home flew out the window the day the bankruptcy judge approved their requests. That, however, need not be the case. All you really need is time, patience, self-discipline and a good solid plan.
Repairing Credit After Bankruptcy: Opening New Lines of Credit
The first thing you need to know is that you should never be fooled by companies that claim that they can help you “wipe” a bankruptcy off your record. There is no legal way to erase a bankruptcy from your credit record so all these people are looking to do is get their hands on your hard earned money in return for some useless information.
The good news when it comes to repairing a credit report after bankruptcy is that credit bureaus will pay more attention to what you are doing now and your recent financial activities than to what went on the past. Start using credit again responsibly immediately after bankruptcy and you will be on your way back to a good credit reputation faster than you might have ever imagined.
It is not going to be easy of course to find a company willing to extend a line of credit to you right after a bankruptcy, especially under the tighter credit standards that are in place right now. But even if you just open a secured credit card account or pay for a new appliance in installments rather than with cash you will still be paying on new lines of credit – something the credit bureaus like to see and should reward you for.
Following the Credit Repair Golden Rules
If you are trying to repair your credit report after bankruptcy by using new lines of credit there are a couple of “golden rules” that you must abide by. They are – in a nutshell – that you never miss a payment on your new lines of credit and that you NEVER pay late, not even by a day. Although they are looking at your recent activity you do still have a red flag next to your name in the eyes of the credit bureau and if you make a late payment it is a signal to them that you are back to your bad old ways and they will downgrade you right away, chipping away at any progress you might have made towards credit repair.
The best way to make sure that you never make a late payment is set up payments to go out automatically. In years gone by that meant setting up a standing order with your bank but nowadays almost all of those companies who extend credit of any kind have an auto- pay option that will simply charge your debit card or bank account on the same day every month.
There is even rarely a fee attached to using such a convenience (a bank standing order usually comes with one though) as getting bills paid on time works out in everyone’s favour – the company gets paid on time and they are happy and so are the credit bureaus since you are demonstrating a new level of financial responsibility.
Repairing your credit report after bankruptcy will not happen overnight or in a month. But within 12 – 18 months if you follow a careful plan you should be well on the road to getting a good – even maybe even a great – credit score back and securing a mortgage to purchase that dream home you’ve had in mind for years will become a very real option after all.