AFTER BANKRUPTCY: APPLYING FOR CREDIT - TX Texas The Home Loan Center

Many people who have filed bankruptcy in the past apply for credit the wrong way.

They fill out a credit application and hope for the best. Best case, they probably end up paying a lot more in interest and finance charges - hundreds or even thousands of dollars more, depending on what theyre buying.

Having a perfect mortgage history after bankruptcy will help you when applying for credit.

Refinancing your mortgage after bankruptcy and making timely payments can help you rebuild your credit to potentially higher levels than even before your bankruptcy within as little as two years.

Here are the three steps in more detail...

Step One: Learn how to increase your credit score.

Increasing your credit score is a key factor in lowering the interest rate you pay on loans and getting approved for them as well. Unfortunately, there are a lot of myths out there that can actually hurt your credit score.

There a number of ways to increase your credit score. One way is to watch your credit card balances. Lenders don't like to see them go above 50% of the available credit limit.

For example, if you have a credit limit of $3,000 and you're current balancing owing is $1,800 (60%) that can hurt your credit score. In this situation, there are two ways you can fix the problem.

First, of course, is to pay the balance down so that it's less than 50% of the credit limit. The other way is to get a credit limit increase:

If you can get a credit limit increase to $5,000 that will means you will be at less than 50% of your credit limit ($1,800 balance versus $5,000 credit limit). And you didn't have to pay down the balance by a penny!

Another way to increase your credit score is to add years of positive credit history to your account. Most people don't know about this and it's 100% legal. But that's another article in itself.

The point I am trying to make is that there are a number of strategies you can use to increase your credit score. Best of all, many of them can be implemented quickly and easily.

For more info contact your mortgage consultant now! john.parker@supremelending.com

That said, in this article we are going to talk about the RIGHT way to apply for credit and loans. So what is it? Well there are three steps:

1) Learn how to increase your credit score

2) Know the credit approval process

3) Know how to apply for credit and loans

Now, you want to get all three of these steps right. Not just one or two, but all THREE! See if you miss one, or don't do it just right, you can end up paying $100s, $1,000s or $10,000s in additional interest and finance charges, depending on

After a bankruptcy, it is important that the consumer re-establish his/her credit. This is accomplished by opening credit accounts and using them responsibly, avoiding any late payments and high balances.

How a borrower has re-established and used credit after a BK is one of the primary considerations of the lender when deciding to approve a home mortgage to a borrower with a past bankruptcy.

One way to obtain a credit card if your credit scores won't allow you to qualify is to apply for what they call a secured credit card. You can get this from your local bank. In this case you would put up $100 dollars as a safeguard to allow you get a credit limit of $100-$200. Only use this for items you would normally buy such as groceries and pay it off every month. This will give you one open trade line. You may need a few open tradelines to qualify for a mortgage.

That brings us to step three...

Step 3: Know how to apply for credit and loans.

Knowing which lenders to approach and how to negotiate with them is also really important.

Apply for a loan or credit with the WRONG lender and you're practically guaranteed to be turned down; or, you end up paying a pile of interest.

Then there's there is the negotiation process. This especially important when you're buying a car - for example, people will spend a lot of time negotiating the price of the car they're buying and the value of their trade in (if they have one) - and STILL be taken advantage of. They don't know how to REALLY negotiate for a car.

Think about it. How often do you buy a car? If you are like most of people it's probably once every so many years. Now, how many times a day do you think a busy car dealership negotiates with buyers? Multiply that by weeks, months and years and you can see that they have slightly more experience.

You should now have an idea of the RIGHT way to apply for credit after bankruptcy. Though I wasn't able to go into detail on ALL of the strategies you can use to increase your credit score and qualify for credit and loans at more reasonable rates this should at least give you a starting point.

Step Two: Know the credit approval process

What do potential lenders look for? Here you need to know the questions to ask. For example, do they work with people who have had a bankruptcy in the past? What is the minimum credit score they want to see? These are just the initial questions.

There are a number of other questions. There are also a number of items that send up red flags if a lender sees them on your credit application - ones that could jeopardize your chances of qualifying for the loan or cost you more money in interest.

Another factor when applying for credit and loans is timing. You don't want to apply for credit and loans until you've increased your credit score (most people make this mistake).

Bankruptcy laws are always changing and may or may nor affect your current living situation. Always consult a professional regarding the ramifications of filing bankruptcy.

Even though the credit card is secured by your own funds it is very important that you make timely payments. Any late payments after a Bankruptcy will severely limit your options.