|Question: Can I buy a house even though I declared bankruptcy?|
Believe it or not, there is financial life after bankruptcy. It will take some effort on your part, but you can rebuild your credit with careful budgeting and record keeping.
A bankruptcy is a red flag that makes lenders leery, and it will stay on your credit report for 10 years. If you have a history of bad credit (e.g., a bankruptcy and numerous late payments) and don't take steps to repair it, most lenders won't take on the risk of giving you credit. If you find a lender willing to give you credit, you can expect a high interest rate (e.g., twice the going market rate). However, if you work to improve your credit rating by obtaining a line of credit and making all of your payments on time, for example, you may be able to obtain the financing you need to buy a home.
Remember that lenders want to see good credit histories. Therefore, it's important to begin establishing good credit as soon as possible. Many people believe that the way to fix a bad credit problem is to pay for everything in cash. Although this is a good way to get out of debt and control your spending, it won't help you get a mortgage. When you pay cash, you're not establishing credit. Thus, lenders have no way of gauging whether you're a good or bad credit risk.
Consider beginning your journey back to creditworthiness by obtaining a low-interest credit card. Be sure to make your payments on time, every month. If you can't get a traditional credit card, ask about a secured credit card that operates much like an ATM debit card. Here, your credit limit is based on the amount you deposit in your account. For example, if you deposit $500 in the account, you'll have a credit limit of $500. If high credit limits are what landed you in your current financial troubles, a secured card can help you stay on track by keeping you on a short leash. In a short time, you may be able to prove to lenders that you're creditworthy.
For more information, contact your local consumer credit counselor.