Do You Have a Bankruptcy in Your

Credit History?

A bankruptcy filing delivers a devastating blow to your credit and FICO score, but it doesn't mean you have to wait 10 years before you can qualify for a mortgage. Many consumers who have filed for bankruptcy are able to obtain a mortgage, although it is probably going to be at a higher rate than someone with excellent scores. 

While credit card companies may care about what happened before you filed for bankruptcy, many mortgage lenders are more interested in your recovery--what youve done since your filing. It won't happen overnight, but here are some tips and things to keep in mind when you inquire about a mortgage with a tarnished credit past:

Give explanations. No mortgage lender is going to ignore the fact that you've filed bankruptcy, and they will likely want to know the cause of the filing. Your lender will be particularly interested in whether the same situation could happen again. Your chances of being qualified are much better if your bankruptcy was caused by a single event such as a loss of employment or a death in the family, than if it was the result of just spending too much.  If the bankruptcy resulted from a single event, it is important to show your lender paperwork supporting the incident, such as the layoff notice or death certificate.

Demonstrate good money habits now. Many people who file bankruptcy swear off credit altogether; however, it is important to re-establish your credit rating. Get a secured credit card or take on some sort of loan for furniture, a car or a major appliance to demonstrate that you are able to make timely payments.  Make sure you are making other payments (utility bills, cell phone, etc.) on time as well. You won't turn things around immediately, but your credit score will improve over time. 

Make dwelling payments a priority.  Lenders typically pay special attention to rent or mortgage payments.  For rent, make sure you pay by check so you can verify timely payments.  Even people still living at home with their parents must be able to show consistent payment history when they apply for a mortgage.  Also, keep the future in mind if you feel you may be in a financial crunch; make sure your rent or mortgage payment is the one thing you pay!

Dispute any credit report errors. There's no need to add to your troubled credit history with errors on your credit report. Get a copy of your credit report from each of the three major credit reporting agencies: Equifax, http://www.equifax.com; Experian, http://www.experian.com; and TransUnion, http://www.tuc.com. If you encounter any errors, inform the CRA in writing what information you believe to be inaccurate and request deletion or correction.

Save your money. Lenders may be more willing to loan you money if youve saved up a considerable amount of money for a down payment.  Be wise--delay your desires for the "toys" of life until you're settled and stable in your first home.  There is no better way to start securing your future, and the tax benefits of owning will repay you even more.

See more tips for improving your credit score

in other places on my website!