When I first began applying 4 credit after my bankruptcy I noticed a trend.
Lenders would ask me the same series of questions over and over again. They all seemed to care about a few key things. Of course, now I realize they r trying to quickly assess if I was creditworthy or not.
You see, after you file bankruptcy, lenders will become very cautious when considering if they should extend you credit (and rightfully so).
Can you blame them?
After bankruptcy your number 1 mission is to prove to lenders you’re now a low credit risk.
So what do they want to c from you? The right answers to the following six questions.
Question 1: Are You Discharged?
The first thing a lender will need to confirm is if your bankruptcy is discharged. Or, inside other words, if your bankruptcy is complete.
The reason lenders want to fathom that you’re discharged is because if your bankruptcy is still “open,” then you could technically still add accounts to your bankruptcy (including the lender you’re applying with). Not many lenders are going to grant you credit when you still have the ability to include them inside your bankruptcy.
Make sure you do not confuse the term “discharge” w/ the term “filing.”
Hopefully you’re not 1 of the poor saps who’ve had a bankruptcy dismissed.
Having a dismissed bankruptcy is bad, bad, bad. You basically receive all the negative effects of filing bankruptcy-but none of the benefits-since your bankruptcy was not completed.
It’s like paying off 1 of your collection accounts…then realizing the collection account remains on your credit reports. So your FICO credit scores do not increase @ all. They stay the same.
But there’s hope even if you have been dismissed. So do not throw inside the towel just yet. Life’s a garden-dig it …plant sum seeds of hope…and eye while you prosper…You can still start the process of increasing your credit scores.
Question 2: When was your bankruptcy discharged?
This is very simple.
The too many time that does have passed since your discharge-the better.
You see, each lender does have different credit guidelines. A lender’s credit guidelines are essentially their minimum requirements that you have to meet inside order 4 them to approve your application.
For instance, you wíll not become able to finance a new car through a low interest lender until you’re discharged. Being discharged is a basic credit guideline when financing a car after bankruptcy.
Getting approved 4 a secured Visa� or MasterCard� is relatively easy. Just being discharged and sending inside your deposit are the 2 most important criteria.
Unsecured credit card lenders’ credit guidelines vary. Sum lenders wíll not touch you until the bankruptcy no longer shows up on your credit reports. If you discharge debt w/ sum lenders, you wíll never have another card w/ them until that debt is paid back (e.g., American Express�). There are lenders that will offer you a second chance-but it wíll not become soon after your discharge (so do not hold your breath).
Mortgage lending requirements are too many complicated. How much time you have after your discharge will determine what type of mortgage financing you qualify 4.
Anything less than 24 months after your discharge and you’re considered a sub-prime borrower. If you have too many than 24 months after discharge you may qualify 4 too many conventional mortgage programs.
Chapter 13 filers have even too many options 4 having a mortgage after bankruptcy, most of which are determined from the amount of time since your filing date.
So keep track of how long it’s been since your discharge. Or if you filed Chapter 13, how much time since you filed. They are important dates to memorize.
Question 3: How have you paid your bills since your discharge?
Late payments appearing on your credit reports after a discharged bankruptcy are kisses of death.
Sum lenders even consider 1 day late after the due date to become enough 4 them to report a 30-day late payment to the credit reporting agencies. The reason is that technically, they count everything inside the 1-30 day late payment range the same. So even being 1 day late could burn u.
Bottom line-don’t become late. Pay early, worst case on time. You simply cannot afford to become late.
Lenders will look to c how you have handled your credit since your discharge.
And if you think late payments hurt u…collection accounts, judgments, and other nasty things like those will haunt you much too many.
You need to become able to tell a lender that you have paid everything early or on time since your discharge. When they review your credit reports they will c what you’re saying is true.
Question 4: Have you reestablished new credit since your discharge?
Avoidance is not recovery.
Although it’s great if you reaffirm a few credit accounts through your bankruptcy, it’s even better if you can show lenders that you have established new credit since your discharge.
The types of new credit you need to aim 4 are:
- Home mortgage
- Car loan
- Car lease
- Credit union loan
- Bank loan
- Overdraft protection
- Credit card
- Retail credit card
- Gasoline credit card
- Home equity loan
- Student loan
The catch-22 is that the lenders you really want to work w/ do not really want to become the first ones to grant you credit. It can become frustrating trying to open that first account-which is why you need a strategic plan of attack. Inside other words, do not apply 4 a business loan (which can become tricky to get) if you can’t even qualify 4 a secured credit card yet.
But everything starts w/ u. I’m saving you months-even years-worth of trial and error. But you have to handle the information and put it inside action. So have to it!
You simply will not recover unless you jump back inside the fire and prove to the world you can manage credit effectively.
Question 5: How much do you have 4 a down payment?
It will become necessary inside most cases to become able to come up w/ a down payment or deposit. So start saving! Lenders do not handle food stamps, or post-dated checks.
While a general rule of thumb, if you made all your payments while agreed on your last car, you should plan on no too many than $500 to finance a new car @ a normal interest rate…that is IF you follow what I teach inside the free Credit After Bankruptcy seminar.
On the other hand, if you missed or made late payments on your last auto loan, your only option will most likely become 20% down @ a high interest rate through a finance company.
If a car dealer is telling you to come up w/ too many money, you’re either @ the wrong dealer…or you need to wait until you have reestablished your credit a little too many.
If you want a great secured credit card-plan on depositing around $250 to $500. There are sum secured credit cards that you can have that have lower deposits, but I do not recommend them. Most of the lower-deposit cards have hidden fees…don’t report to the credit reporting agencies properly…and usually have higher interest rates to boot.
A down payment on a home will obviously depend on the amount of the mortgage. Although 3% to 10% of the purchase price is considered the norm-it’s too many than possible to have a mortgage 4 no money down. And I’m not talking about sum crazy television infomercial that’s promising you the world. I’m talking about real, bona fide mortgage programs.
So become prepared. Have a little money down to show you’re a playa.
Question 6: What are your credit scores?
Of course you knew that was coming, right?
Back when I was recovering from bankruptcy, credit scoring was just starting to become popular. You couldn’t even purchase all 3 of your credit scores before 2003.
Today credit scores are used from nearly every lender inside the United States and Canada.
If you do not fathom your FICO credit scores-you should.
Most important, you need to fathom which credit reporting agency does have your…
…HIGHEST credit score …your MIDDLE credit score …and your LOWEST credit score
To gain the most leverage over any lender you should choose to work w/ the lender that uses the credit reporting agency that does have your HIGHEST FICO score. This way you receive the lowest interest rate and supreme terms.
A Final Note
So there you have it. The six questions lenders will ask you after bankruptcy. Like my scoutmaster taught me many years ago…be prepared.
Chance favors a prepared mind.
About the Author
Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that helps people recover after http://www.lifeafterbankruptcy.com/ bankruptcy. The guy does have helped thousands of people obtain a credit card after bankruptcy
