In the past 6 years, more than 5 million Americans filed for bankruptcy. And while many people believe that filing for bankruptcy causes long-term financial ruin — and will keep them from ever being able to purchase a home — it turns out that might not be the case.
According to The Cost of Bankruptcy, a recent study from Lending Tree, within a year, 43 percent of people with a bankruptcy on their record are able to get their credit score to 640 or higher, which is the credit level typically necessary to qualify for a home loan.
Within two years of filing bankruptcy, that number jumps to 65 percent and at five years, 75 percent of people who filed bankruptcy have a FICO score of 640 or above.
If you have a bankruptcy on your credit file, you’re likely to pay higher interest rates, but buying a home is still possible. However, if you can get your credit score up, the bankruptcy is unlikely to have a major impact on your loan. According to the study, people with a credit score between 720 and 739 who applied for a mortgage three years after filing for bankruptcy were offered similar interest rates to those without a bankruptcy on their credit file.