Many of my clients say that credit cards are
what caused the problem in the first place, and they want to stay
far away from them. In many respects, that is a good thing.
But if you are trying to re-establish new, good credit,
unfortunately it is necessary.
And the reason is this. Credit cards are not a bad thing.
It is the misuse of them which is bad. Uncontrolled
spending, with the inability to pay them off shows an inability to
handle credit. Creditors want to see that you can control
Mortgage lenders understand that bad things happen sometimes.
But they wish to see that you have recovered from the bankruptcy
and can show that you can incur debt and pay it off or down
responsibly every month. If they see that you can do this,
they will be more willing to lend you a large amount of money.
Even though it may be difficult to obtain credit immediately after
a bankruptcy, we suggest that you apply for a secured credit card,
as a starter. Secured credit cards require that you put
money on the card in advance of you using it. For example,
if the card has a $300 limit, you would be required to pay the
$300 to the credit card company, and then use the card like a
debit card. Capital One offers this type of card.
Over time, the mortgage lender is hoping to see 3 lines of credit
ie 2 credit cards and a car lease. The credit cards should
be of the unsecured nature, and you should try to increase the
credit limit. A higher credit limit indicates to the
mortgage lender that the credit card company has faith in you and
that you pay your account on time.
How long do you have to wait before getting a mortgage again?
With a conventional Canadian mortgage lender, you will need to
have been discharged for at least 2 years from bankruptcy, and
have re-established credit for at least one year. You will
need at least a 5% downpayment, though many lenders will want you
to have a larger downpayment.
With Subprime lenders and private lenders, they may only require
you to be discharged from your bankruptcy, without a waiting
period. Their interest rates are higher and they may require
a downpayment of between 15% - 25%.
Please check with us to learn what options are available for you.