5 – Obtain a secured credit card or loan
A secured credit card or loan will require you to put down a deposit or collateral to secure the credit.
Another option is to become an authorized user on someone else’s credit card, which can help you build credit without taking on any new debt.
6 – Avoid too much new consumer debt
Taking on new debt, such as a car loan or another credit card, can negatively impact your credit score and make it harder to get approved for a mortgage.
It is best to avoid taking on too much new consumer debt because each credit application negatively affects your credit score and each new consumer debt increases your Total Debt Servicing Ratio (TDS) making it harder to qualify for a mortgage.
7 – Save for a down payment and closing costs
Saving for a down payment and closing costs as well as establishing a 3-4 month emergency savings fund shows lenders that you are financially responsible and can help improve your chances of getting approved for a mortgage. It also helps your peace of mind knowing that you have the flexibility to purchase and support your family in case of income disruption.
8 – Avoid double bankruptcy and consumer proposal
Use this guide as a way to avoid getting into a situation where you may need to file for bankruptcy or consumer proposal again.
A double bankruptcy or CP produces further problems when applying for a mortgage or rebuilding your already bruised credit.
Conclusions and Further Thoughts
In conclusion, rebuilding your credit after bankruptcy or consumer proposal takes time and effort, but it is necessary if you want to qualify for a mortgage.
By understanding your bankruptcy discharge period, reestablishing credit trade lines, making on-time payments, keeping your credit utilization low, avoiding new debt, and saving for a down payment and closing costs, you can improve your credit score and increase your chances of getting approved for a mortgage.
PS – One of my hobbies is blogging about mortgages, debt and government policy. During the day I’m a MORTGAGE BROKER in Kelowna, BC!
Check out the Huber Mortgage Home Buyers Guide HERE