Having a record of bankruptcy or foreclosure in your credit report is obviously a negative remark and can send out a bad impression to future lenders.

Does this mean that you can never get approved for another home loan? The good news is, you can still acquire a new loan despite a history of bankruptcy or foreclosure.

But before you do, you must first take the steps towards rebuilding your credit:

Rebuilding Your Credit History

First, order a copy of your credit report from all from the three major credit bureaus (Equifax, TransUnion or Experian) and make sure that all the information in your report is correct. The next step is to try to open new accounts. You may think that it is impossible but you can actually apply for new accounts that do not require credit checking.

For instance, you may acquire a department store credit card and a gas station credit card from your favorite merchants. These credit cards only provide a 30 day repayment period so you must make sure that you can pay off your debts on time. After at least six months of using your department store card or gas station card regularly, you can try to apply for a secured credit card to build-up your credit rating.

Generally, a person who has been discharged from bankruptcy can achieve a good credit rating within a year or two. This of course, will depend on how you manage your accounts and how well you can keep up with your repayment.

Saving for a Down Payment

Those with less-than-perfect credit scores are expected to give a higher down payment. Mortgage lenders will often require at least 20% of down payment or even higher for customers who are rebuilding their credit.

It is a good idea to start saving your money while you are trying to improve your credit score. Thus, by the time you’re ready to apply for a home loan, you can put down the 20% down payment without putting much strain on your budget.

Buying Home After Foreclosure

When you are ready to apply for a home loan, remember the lessons you learned from your previous experiences. Choose a legitimate and trusted lending company. Do not forget to ask for a copy of the Good Faith Estimate of Costs from your lender days before the actual closing. The Good Faith Estimate of Costs all the exact costs gives you assurance of how much down payment you will give and the interest rate of your mortgage.

It is recommended to hire an attorney to assist you to make sure that the contract you will be signing is legal and fair. Once the contract has been signed, be prepared to take on your payment obligations seriously from the start until the end of your loan’s term.