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2-3 Years after bankruptcy discharge is the magic number - Once you have filed bankruptcy, even the next day you can still get a car loan and possibly a mortgage loan. But, getting an unsecured loan like a credit card or a personal is usually out of the question until you have some collateral or until 2-3 years have passed.
Most lenders will not approve any loan, auto or home loan included, until 2-3 years has passed from the discharge of the bankruptcy. This is just a basic rule of thumb for most lenders. If you are seeking a loan sooner than the 2-3 year mark, you will need to apply with a subprime lender (a lender who specializes in loans for people with bad credit). Even with a subprime lender, you may still need to have a down payment in order to get approved for the loan.
Credit Cards and Unsecured Debt Will Be Very Difficult to Obtain - The best way to combat this factor is to start rebuilding your credit. Apply for a credit card with a store that uses in house financing. This means that the same company that sells you the merchandise also finances it for you. These places are usually fairly easy to get approved with. They will usually start you out with a small credit limit like a $3-500 limit. If you make all of your payments on time, they will usually bump your credit limit up about every 6 months.
There are some credit card companies that will charge you a high processing fee, from $30-$200 or more just to have a $300-$400 credit limit. Maybe get just one of these card and make on time payments with this card too. After a while this company will start raising your credit limit as well. After a year or so of on time payments, you should see your credit score going up and you might be able to qualify for a small unsecured loan.
A bankruptcy can stay on your credit report for 7-10 years. However, after 3-4 years, you may start seeing your credit options open up quite a bit, almost as if you had not filed bankruptcy before. It depends, though, on if you make your other monthly payments on time, from the time your bankruptcy is discharged.
However, opening new credit accounts is the first step to rebuilding credit. Low credit scores are common following a bankruptcy. This makes it difficult to obtain a mortgage, auto loan, etc. Here are a few tips to help you increase your credit score and re-establish a good credit history.
Understanding the Usefulness of Credit Scores
If you are hoping to make a purchase using credit, credit scores are essential. Prior to obtaining any sort of credit, lenders must assess a copy of your credit report. In some cases, lenders simply review your three digit score. This is practical when approving an applicant for instant credit. Those with a low credit score are at a disadvantage.
Following a bankruptcy, you can expect your credit score to nosedive. Thus, it is important to take the necessary steps to improve your credit standing. Bankruptcy does not last forever. However, you must put forth the effort to boost your credit and prove your creditworthiness.
Avoid Repeating Past Mistakes
If bad credit or bankruptcy occurred because of using credit unwisely, learn from your mistakes and move forward. Many young adults acquire an excessive amount of debt. In some instances, they do not fully understand how credit works.
If you are drowning in debt, bankruptcy may be the only alternative. If so, avoid making the same mistake twice. Sadly, there are individuals who file bankruptcy repeatedly. However, rebuilding credit takes time. Once you are on the path to increasing your credit standing, avoid bad credit decisions.
Establish New Credit Accounts
The only approach for establishing new credit is opening new credit accounts. At first, this may sound scary. However, this maneuver is necessary to quickly increase credit scores. New credit accounts may consist of a major credit card, store credit card, automobile loan, etc.
Secured credit cards are very effective and easy to qualify for. These sorts of credit cards require applicants to have a down payment. However, it's well worth the fee. Once you have obtained a new credit card, attempt to do three things: make timely payment, maintain low balances, payoff the balance each month. By doing so, each month your score will increase. Soon, you will qualify for an unsecured credit card. Within 24 months, you may also qualify for a mortgage or auto loan with a comparably low rate..