How to Build Up Your Credit After Filing Bankruptcy

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After declaring bankruptcy in Canada, all of your unsecured debts are eliminated.
This is also documented on your credit report and remains there for a minimum of six years.
This doesn't mean that you can't get credit again for six years.
It just means that you will have a hard time getting credit.
There are a number of things you can do to establish and rebuild your credit after a bankruptcy to be able to qualify for traditional credit again.
Qualifying For Credit Again Before extending credit to a borrower after a bankruptcy, lenders want to see established credit for at least two years after being discharged from bankruptcy.
They also want to see different kinds of credit being obtained and used perfectly in different amounts.
For example, credit cards are revolving credit and loans are called installment credit.
Revolving credit means that you constantly have what ever your credit limit is available to you but with an installment loan, you can't access what has already been paid off on the loan.
At a minimum, lenders offering mortgages want to see at least one revolving credit line and one installment credit line with a minimum of credit $1,500 each.
They are also must have perfect repayment histories.
Secured Credit Card A secured credit card works to satisfy the revolving credit line that lenders are looking for.
You have to save up $500-$1,000 to be used as a security deposit or collateral.
This security deposit then becomes your credit limit.
You are then issued a regular credit card to use.
If you don't make the monthly payment on time, the credit card issuer will take the security deposit and pay off your bill with it and then cancel your card.
As you continue to save, you will want to increase your credit limit to at least $1,500 by increasing your security deposit.
Savings Loan To satisfy the installment credit line that lenders want to see, the Savings Loan is the best option.
With a Savings Loan, instead of giving the money loaned directly to you, it is used to purchase a Guaranteed Investment Certificate (GIC) for you with a large Canadian financial institution.
This GIC acts as collateral for the loan.
You make the monthly payments on the loan and then when the loan is paid off, you get the GIC and the interest that the GIC has earned.
It works to establish your credit but also helps you save money for the future.
You can use these savings for a down payment on a house or car or just as a rainy day fund.
If you obtain both a Secured Credit Card and a Savings Loan and make full and timely payments on both of these over a period of two years after your bankruptcy discharge, you will have built and established your credit to be able to qualify for traditional financing like a mortgage.
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