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Bankruptcies & Foreclosures - Q &
A
| Q: |
How do you
clear up bad credit? |
| A: |
There
is no fast and easy way to repair damaged credit that took months or
years to occur. The law allows negative information to appear on an
individual's credit record from 7 to 10 years.
The first step is to check your existing credit record. Anyone can
obtain copies of their own credit report free of charge if they have
been turned down for credit recently. For a fee, people can request
copies of their own credit report from the three major credit reporting
agencies: Experian at (800) 392-1122, Equifax at (800) 685-1111 and
Trans Union at (312) 408-1050. The bureau also should provide
instructions on how to read the report and how to dispute any
inaccuracies it contains.
If the credit report is correct, take care of any outstanding
delinquent obligations first.
Resources: * "Rebuild Your Credit: Law Form Kit," Nolo
Press, Berkeley, Calif.; 1993.
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| Q: |
What options
are there after Chapter 11? |
| A: |
A
previous bankruptcy can remain in a credit file for seven to 10 years.
Depending on when the bankruptcy was discharged and what kind of
credit a borrower has reestablished since then, it needn't be an
obstacle to obtaining loan approval. The longer ago the discharge
occurred, the better off a loan applicant will be.
Many lenders also will take into account the circumstances
surrounding a bankruptcy. For example, they may look more favorably upon
you as a borrower if your bankruptcy was due to financial reverses you
suffered due to your employer's own financial difficulties. On the other
hand, if you declared bankruptcy because you overextended your personal
credit lines and lived beyond your means, a lender probably won't be as
forgiving.
If you are in the latter category, you may want to contact a mortgage
broker who may qualify them for a "b" or "c ," loan,
which usually comes at a higher interest rate.
Resources:
* "Rebuild Your Credit: Law Form Kit," Nolo Press, Berkeley,
Calif.; 1993.
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| Q: |
Can I
refinance after bankruptcy? |
| A: |
Refinancing
may be prudent but could be difficult after a bankruptcy. If you're
considering bankruptcy, you may want to go to your current lender first
and explain the situation. If you have been current on your payments,
the lender may be accommodating and refinance your loan, easing your
financial situation. |
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| Q: |
How long do
bankruptcies and foreclosures stay on a credit report? |
| A: |
Bankruptcies
and foreclosures can remain on a credit report for seven to 10 years.
Some lenders will consider an borrower earlier if they have
reestablished good credit. The circumstances surrounding the bankruptcy
can also influence a lender's decision. For example, if you went through
a bankruptcy because your employer had financial difficulties, a lender
may be more sympathetic. If, however, you went through bankruptcy
because you overextended personal credit lines and lived beyond your
means, the lender probably will be less inclined to be flexible.
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| Q: |
What can I
do if I have bad credit? |
| A: |
While
some people have rebounded from a foreclosure to buy another home within
several years, credit problems stemming from a foreclosure can continue
much longer for others.
Real estate experts say you should be candid with your lender in
discussing these issues. If your bankruptcy resulted from losing your
job due to your employer's financial difficulties, a lender probably
will look upon your situation more favorably than if your bankruptcy was
caused by overextended credit cards.
Resources:
*"Rebuild Your Credit: Law Form Kit," Nolo Press, Berkeley,
Calif.; 1993.
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| Q: |
How bad is a
previous foreclosure on credit? |
| A: |
A
property foreclosure is one of the most damaging events in a borrower's
credit history. In terms of the effect on credit history, a deed in lieu
of foreclosure or a short sale is not as adverse an event as is a forced
foreclosure. |
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Copyright 1999 Inman News Features
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