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Home » Business And Finance Articles » After Bankruptcy Rebuild Your Credit Before Buying Real Estate

After Bankruptcy, Rebuild Your Credit Before Buying Real Estate

You have gone through bankruptcy and you do not owe anyone. Now is the perfect time to purchase that home you have always wanted â€" right? Wrong! Yes, you can probably locate a real estate mortgage lender, since you cannot declare chapter 7 bankruptcy again for at least 6 years. The problem is that you will pay the highest finance charges for the privilege of obtaining that real estate mortgage, charges that will extend over the life of the real estate loan.

Before even looking at real estate, get your credit straightened up first. The bankruptcy will appear on all three of your credit reports from seven-to-ten years, which will make you a higher risk to real estate lenders. You cannot do anything about this; however, you can show real estate lenders that you are handling credit much better now by rebuilding it. This can lower your risk factor, when obtaining a real estate mortgage. Using the following improvement steps, you actually can rebuild your credit in a relatively short time.

First, get copies of your credit report from the credit agencies, and clean them up. You have the right to one free report from all three agencies annually, which can be obtained through www.annualcreditreport.com.

Ensure that creditors, who were listed in your bankruptcy, have cleared their information from your credit reports. Otherwise, it will appear as if you still owe them money and are not paying.

Ensure any creditors not listed in your bankruptcy and you are paying regularly have been reporting your good credit record to all three agencies. Contact any not reporting this and ask them to do so. This will increase your chances of getting a loan for your real estate.

If there was a specific event or cause for your bankruptcy, you can add up to a 100-word explanation to your credit report at each agency. The real estate lender will get this explanation as part of your credit report.

It will look especially good to real estate lenders if you have received credit counseling, and the counseling will help you in several ways. A good credit counseling agency will help you create a budget and counsel you in how to use and stick to it. They offer counseling on using credit in your future, as well as how to re-establish your credit. They can help you move toward your goal of buying real estate. Once you have successfully completed credit counseling, ask them for something in writing to that effect. It can help when applying for your real estate loan

The problem is finding a reputable agency. Some are downright questionable. Here are a few ideas to assist you in locating a reputable agency:

• They should be a member of either the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. Both are national trade associations.

• Agencies approved by the U.S. Trustee's office (part of the Department of Justice) are good agencies. You can see those for your area at: http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm.

• Interview the agencies, asking what they offer and the cost for each service. Good agencies should meet with you for 60-to-90 minutes, reviewing your financial situation and offering budgeting advice â€" before doing any credit repair.

• Ask for costs in writing from the agency you choose. They should charge around $50 or less, with budget counseling sessions for less than $20 each.

• Steer clear of those who push their debt management program, where they want you to pay all your remaining creditors through them.

• Check http://www.ftc.gov/bcp/conline/pubs/credit/fiscal.htm for more ideas from the Federal Trade Commission.

Use the credit counseling agencies to help you rebuild your credit the right way. It can take less than a year to achieve; yet, it will make a big difference when you obtain that real estate mortgage.

And here is another random article you might be interested in...

The Truth About Bankruptcy

The prospect of bankruptcy is an ever increasing reality facing many individuals. Figures released recently by the Department of Trade and Industry (DTI) show that bankruptcies and insolvencies have hit an all-time high.

The Figures For 2005:

13,501 people declared bankrupt in UK

6960 adults entered into voluntary insolvency known as Individual Voluntary Agreement

What To Do If You Are Thinking Of Declaring Yourself Bankrupt.

It's better to enter into an IVA than to declare yourself bankrupt. Under an IVA, borrowers agree to pay a fixed monthly amount over an agreed period, subject to approval by three-quarters of their creditors. In return, the interest on their debts is frozen, and some of their debt - in some cases, up to four-fifths (80%) is written off.

What Has Caused This?

Te lending boom which began roughly a dozen years ago led to a rise in credit problems. However, these figures are even higher than those recorded in the recession of the early Nineties. This sounds off a big alarm bell regarding how we manage our finances.

The breadth and depth of our borrowing habit have increased considerably, as relaxed lending standards have led to a rise in both the number of borrowers and the overall amount that individuals can borrow. In short, we have become credit junkies. We live today and pay tomorrow.

Naturally, this borrowing binge creates victims, as over-indebted people struggle to meet rising debt repayments and their finances begin to spiral hopelessly out of control.

What Criteria Is Required For Declaring Myself IVA?

Bankruptcy laws have become more relaxed, with some people now seeing it as an easy option or 'get out' to resolve their problems. It does, however, still impact upon your financial life.

You may be reading this thinking an IVA is your best option, but it only really applies if you are working full time and you owe more than £7,500 to three or more lenders. It's also expensive to arrange ( you would be looking at costs of around £6,500 ! ).

Alternatively, you can attempt to tackle the problem yourself by increasing your income, reducing your outgoings, and throwing all your spare cash at your debts.