Post declaring bankruptcy, an individual is eliminated of all his or her unsecured debts. The same is documented on the credit report of the individuals and it remains there on the credit report for at least six years. However, this does not mean that you are unable to obtain credit for a period of six years. It actually means that you will be having a very difficult time in obtaining credit. Nevertheless, there are various things that can be done for establishing and rebuilding credit post bankruptcy in order to qualify for customary credit all over again.
How to Qualify for Customary Credit All Over Again
Prior to extending credit to a specific borrower post bankruptcy, the lender makes it a point to go through the established credit of the borrower for minimum two year. The lender goes through the established credit for the period when the borrower was released from bankruptcy. The lenders also have this urge of seeing the different types of credit being achieved and used ideally in varied amounts. In this scenario, loans are known as installment credit and credit cards make for revolving credit. Lenders providing mortgages, at the minimum, want to go through at least one credit card or revolving credit line along with one loan or installment credit line with a minimum credit of $1500 each. It is also a must for the borrowers to possess perfect repayment histories.
Secured Credit Card
A secured credit card actually works in satisfying revolving credit line which the lenders look out for. It is necessary for the borrower to save an amount of approximately $500 to $1000 which can be used in the form of collateral or security deposit. It is this amount or so-called security deposit that becomes the borrower’s credit limit. The borrower is then issued a credit card to be used on regular basis. However, it is important to note that if the borrower does not make the monthly payment on time, the security deposit will be taken away by the issuer of the card. Not only this, the credit card issuer will also pay off the bill along with the security deposit and then cancel the credit card. As the borrower continues saving, he or she will look forward to increasing credit limit to minimum $1500 by bringing about an increase in his or her security deposit.
Savings loan serves as the best option for satisfying the line of credit installment that the lenders generally look forward to seeing. With savings loan, the money-lending institution, purchases a GIC or Guaranteed Investment certificate for the borrower instead of offering the money that is loaned directly. This certificate works in the form of collateral for loan. The borrower is required to make monthly payments on this loan. Once the loan is completely paid-off, the borrower receives the GIC along with the interest earned by the GIC. This certificate not only helps in establishing the credit of the borrower but also helps in saving a good amount of money to be used in the future.