Rebuilding your Credit after Bankruptcy?

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the most common bankruptcy filing in the United States. Someone who files Chapter 7 bankruptcy indicates 'undue hardship.' Chapter 7 bankruptcy is allowed to keep some property such as their home and car loans, but other assets are liquidated in a sale to repay the creditors. As defined by Wikipedia.org, Chapter 7 bankruptcy:

It is important for a person considering bankruptcy to understand that a chapter 7 bankruptcy stays on their credit for ten years after filing.

Laws also require that people, also known as debtors, who file chapter 7 or 13 bankruptcies must also take a personal financial management course or they may be denied under new laws.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is the 'financial reorganization' bankruptcy where an individual or debtor who has the sufficient disposable income to repay their debts under a court approved plan. This bankruptcy can remain on the debtor's credit report for up to ten years. As there is the financial plan to get an individual back on track, with a chapter 13 bankruptcy, they must get permission of the bankruptcy court to obtain credit for a purchase such as a used car.

Correcting your Credit Report

After filing for bankruptcy it is important to check your credit and make sure that all lines of credit are being reported correctly. If you do have to dispute a credit error, there is an informational page from the FTC that includes facts for consumers, check it out online: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.shtm

Installment Loans

Installment Auto Loans

In an article by eHow Contributing Writer Keith Evans titled "The Best Way to Rebuild Credit After Bankruptcy" he discusses a 'few financial tasks' that people can do to restore their bad credit rating after a bankruptcy. One of them is to 'Get a Car Loan.' If you read the many articles about 'rebuilding bad credit' or rebuilding bad credit after a bankruptcy, you will notice this word of advice in more than a few articles.

Keith's article sums describes why good payments on a car loan can help you rebuild your credit:

Effective management of revolving credit, like credit cards, demonstrates that a post-bankruptcy borrower is capable of managing small amounts of debt, but some lenders look for proof that the borrower can make timely payments over a longer period of time. Obtaining an installment loan, and paying it on time, can be just the proof that mortgage and other lenders want to see. Some installment loans, like unsecured personal loans and mortgages, can be very difficult to obtain after bankruptcy. Car dealers, however, often underwrite their own loans and have a number of programs for dealing with "problem credit" borrowers. Eager to close a deal and sell a car, car dealers are often a primary source of financing for borrowers who have experienced bankruptcy. Make the car payments on time, and the positive report to the credit bureau will go a long way toward rebuilding credit.

Read more: Best Way - The Best Way to Rebuild Credit After Bankruptcy | eHow.com http://www.ehow.com/way_5301099_way-rebuild-credit-after-bankruptcy.html#ixzz0vf1omwut

A couple takeaways that I would like to discuss about installment auto loans to build your credit.

• After bankruptcy you have an opportunity to get a Fresh Start with your finances. It's not a time to get back over your head in debt. Discuss your finances with a financial planner, your spouse, and your bankruptcy trustee if required. Know your budget to make your monthly payment, and stick to it.

• Making on time car payments is a huge indication to lenders that you are financially stable after bankruptcy. Lenders are looking to see if your credit and payment patterns have improved since filing for bankruptcy. Your on time auto loan payments really can make a difference in your credit score!

• Auto lender's have experienced the 'credit crunch' as well. Some banks are starting to approve more loans for those who have a closed bankruptcy. Come to the dealership with all your documentation to get you approved. If it becomes a drawn out process for the underwriter to get the information to get you approved, it may reduce that underwriter's confidence in your loan. To get approved with a bank, credit union or dealer financing with Fresh Start Car Credit's exclusive dealer be sure to bring the following for faster loan approval:

  • Valid Driver's License

  • Insurance Card

  • Two of your most recent pay stubs

  • A bill within the last thirty days with your name and address

  • Your little black book for references

  • Your down payment funds

• Ask questions! If you are purchasing a car with dealer financing (also know as buy here pay here or in-house financing), check if they report all their payments to the credit bureau. Some only report to the credit bureau if you have fallen behind on your loan. Fresh Start Car Credit's car dealer in Lakewood Colorado has dealer financing and reports all payments to the credit bureau, however, some do not. Might as well get credit for your efforts to improve your credit!

Secured Credit Cards

More coming soon!

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08/13/2010