Bankruptcy puts a major dent in your credit and reduces your chances of qualifying for future loans and credit cards. A bankruptcy can remain on your credit report for up to a decade; however, that doesn’t mean that borrowing money in the future is impossible. Review these tips on improving your chances of getting a loan after bankruptcy.
Rebuild Your Credit
Even with a history of bankruptcies and bad financial decisions, you can still show that you are now financially responsible. The best solution is to start rebuilding your credit. There are several ways to rebuild credit:
- Use a credit card responsibly
- Pay off debts
- Make loan payments on time
Anyone who pursues this task should expect to see some results after a few months. The best results are seen after several years of financial stability. Most lenders and financial organizations want to see at least one year of steady payments that are made on time and in full.
Remove Marks on Credit Report
Remove the negative marks on your credit report that reflect late or missed payments, loan defaults, etc. If you’ve resolved these problems years ago, have the marks removed immediately. A single negative marker may reduce your chances of receiving a loan by as much as half.
Reduce Your Credit Inquiries
It’s important not to jump into applying for too many loans after years of having good credit. There is no guarantee that you’ll receive any loan, even with excellent credit. Avoid making multiple inquiries that will show up on the credit report. Making too many inquiries in a short period of time makes you look too eager and too impatient to borrow money again.
Review the Exceptions
After filing for bankruptcy, you’re eligible for financing in one or two years. There are industry standards that all lenders follow; however, several lenders make exceptions in unusual cases. A loan can be approved earlier if the borrower shows proof of making stable, responsible payments.
As you rebuild credit, it’s equally important to start rebuilding your savings. The more savings you have, the less funding you’ll need, which stops you from borrowing money that cannot be repaid. Most banks encourage this behavior by allowing the savings accounts to accumulate interest.
Make All Payments on Time
Make all of your payments on time, including rent, utilities and insurance bills in addition to loans. Being able to pay off loans is unimportant if you cannot pay your basic bills. After filing for bankruptcy, once you apply for a new loan, use the proof of these payments to show that you’re capable of financial responsibility.
Bankruptcy has its numerous advantages and disadvantages. There is the main advantage of discharging all debts and of creating a newer, more affordable payment plan. The main disadvantage is the universally negative view of bankruptcy as the ultimate sign of financial ineptitude. Even so, many individuals and businesses have recovered from the process and been able to restore their credit using the helpful advice of lending insiders.