Bankruptcy remains on your credit report for a period of up to ten years; and with this blot on your credit report no one would be very willing to lend to you. But that doesn’t mean that you cannot get any loan after bankruptcy. You can still get loans but the interest rates and terms of loans would not be very attractive for you (as compared to what they would be for someone with good credit history).
However, there are two interesting questions around seeking credit after bankruptcy:
- Do you really need credit?
- If you do not really need credit, then should you avoid it?
Analyze your financial situation and draw up your financial plan
This is an absolute must for everyone and if you have been through bankruptcy then it becomes even more necessary that you create a financial plan and stick to it. Your financial plan should include your assets, liabilities, income, expenses, long/short/medium term financial goals and emergency fund needs. You might want to get a new car or buy your own home or buy some latest gadgets or dresses… but if your financial plan does not allow it then you should avoid such expenses and move them further into future when you are financially stronger. Getting loans for car, home etc. should be avoided and it should all be governed by financial discipline and your overall financial plan.
Improving your credit score after bankruptcy is very important
So, if you don’t really need credit should you avoid it? – Answer is both ‘Yes’ and ‘No’. ‘Yes’ because you should avoid loans and ‘No’ because it is recommended that you get a secured credit card and use it as a means for improving your credit score.
Since getting any kind of unsecured loans after bankruptcy is very difficult, most people are left with the option of getting a secured credit card. Here it is important to mention that in any case you should not be treating the secured credit card as a credit line for serious borrowing. It has to be strictly treated as a credit history improvement mechanism. So, you should use it to such an extent that you are able to make full payment every month on your secured credit card. Also, ensure that the payment is made well in time.
Similarly, you should be paying all your other bills and taxes etc. in time and in full amounts too. All these will add to your credit history and will help you rebuild your credit score.
Getting loans after bankruptcy
As mentioned earlier, it is almost impossible to get any kind of loan after bankruptcy. However, if you are able to get any sort of loan after bankruptcy, it would have very harsh interest rates and terms. Also, getting loans would be particularly tough for first 2 years that follow your bankruptcy discharge. Moreover, the lenders would have an even stringent list of qualification criteria for people with bad credit history.
Where to get a loan after bankruptcy?
Since getting a loan after bankruptcy is very difficult, a lot of people ask this question – ‘Where to get a loan after bankruptcy’. This is important also because you will need to find reliable lenders who are ready to lend to people with bad credit history. The best way to find such lenders would be through references from friends and family members who have had any experience (good experience) with these lenders. After that it would be a tough negotiation for you. But make sure that you carefully go through and understand all the terms and conditions before agreeing to them.
In any case, you should seek advice from a seasoned credit advisor/lawyer that deals in such matters as getting credit after bankruptcy.