Mortgage Loans After Bankruptcy - Ways To Boost Your Fico Score

Tips to Improve Your Credit Score Before Applying for a Mortgage After Bankruptcy

After a bankruptcy discharge, many lenders are willing to offer home loans even without new lines of credit or a high credit rating. However, having good or fair credit can provide significant advantages, such as better mortgage rates and a wider range of home loan options. Here are a few strategies to help raise your credit score before applying for a mortgage:

1. Pay Creditors on Time The way you manage your bill payments can significantly impact your credit score. Consistently paying bills on time will positively affect your credit report, while even a single late payment can decrease your score by up to 10 points. To avoid this, aim to pay your bills a few days before the due date. While paying on the due date won’t harm your score, early payments may provide a slight boost.

2. Maintain Low Credit Card Balances It is crucial to open a new line of credit after a bankruptcy to rebuild your credit. This could be a credit card, gas card, or retail store card. However, it’s important to keep the balances low. Ideally, your credit card balances should be around 25% of the credit limit. High balances can lower your credit score, so avoid maxing out your cards.

3. Avoid Excessive Credit Inquiries While re-establishing credit involves some credit inquiries, try to minimize the number of applications for new credit accounts. Each credit inquiry can reduce your score by 10 to 12 points. Since your credit score is already low post-bankruptcy, keeping inquiries to a minimum is vital for maintaining or improving your score.

4. Regularly Monitor Your Credit Report To effectively boost your credit score, it’s important to keep a close watch on your credit report. Homebuyers aiming for a prime rate mortgage will need a credit score of at least 680. Achieving a high credit rating after bankruptcy takes time, but by taking proactive steps to improve your score, it’s possible to qualify for a low-rate mortgage within 24 months.

By following these tips, you can steadily improve your credit score, making it easier to secure a favorable mortgage and move forward financially after a bankruptcy.