Since the mortgage collapse in 2008, skittish banks have only loaned money to the most credit-worthy consumers. Now, faced with a major revenue loss as mortgage lending volume declines overall, Wells Fargo may be loaning money to consumers with credit scores as low as 600. Other banks may follow suit, rolling out such programs as “second chance mortgage” or “alternative mortgage programs.”
The 2010 Dodd-Frank Act, along with some other structural changes, may have given banks the confidence they need to begin loaning more money to more people.
Borrowing money again
Wells has stated that it will steer clear of some of the more controversial sub-prime lending programs, such as zero-documentation loans and introductory-rate mortgages (a/k/a adjustable-rate mortgages). Just like a bank must lend money responsibly to make a profit, a bankruptcy consumer must borrow money responsibly in order to fully recover:
- Chapter 7: As soon as you receive your discharge, you may be inundated with credit card offers. That is because the moneylenders know you cannot file another Chapter 7 for another several years. Don’t give into temptation or fall back into old habits. Start with one card with a very low limit, paying off the balance in full every month, and move forward from there as your credit score improves.
- Chapter 13: Depending on the circumstances, you should be able to start borrowing money again after making a handful of on-time plan payments. The same rules apply: start slowly and build up gradually.
Bankruptcy gives you a fresh start. It is then up to you as to whether you move forward or move backwards. By borrowing money responsibly, your bankruptcy filing will only be a memory in just a few short years.
Claim your financial fresh start by contacting us for your free consultation. Our main office is conveniently located in Cocoa Beach.