One of the great worries of most people considering bankruptcy is losing the ability to borrow money in the future. You might be surprised to learn that once discharged from bankruptcy, it is often easier to repair your credit rating than you might think. Keep in mind that, although the fact you’ve declared bankruptcy will remain on your credit report for six years after you are discharged, you are emerging from the process debt free. Since you don’t owe anybody anything, you are an attractive prospect to some lenders. You might pay more for credit, but there are specific things you can do to start the process of restoring your credit availability.
Basically, to earn the right to borrow money, you have to find places to borrow money and then prove you can pay it back. So how can you borrow money with bankruptcy on your credit report? Here are four ways:
- Open a secured credit card account
- Get a car loan
- Get a mortgage using an after bankruptcy lender
- Use a co-signer to get a traditional loan
First, on way you can help to repair your credit is you can easily get a credit card secured by cash deposits. Try your own financial institution first as they might give you a better interest rate. If not, there are companies that specialize in these types of credit cards. Simply put, if you have $250 on deposit, your credit limit is $250. Once you’ve opened the account use it as often as possible. Don’t pay the entire balance every month. As surprising as it might seem, banks don”t like credit card holders who pay their entire balances every month since they don’t earn any interest on your carry over balances. So let them make a few pennies, but don’t go overboard.
Second, take out a car loan on a less expensive car, preferably from you own bank as you might get a better interest rate. However, if you have to pay more interest through a dealer, do it. These loans are easier to get since they are secured by the car and they are a great way to demonstrate your ability to pay on time and help repair your credit report.
Third, get a mortgage. This might seem like a crazy idea, but remember, you are debt free. There are lenders out there that specialize in loaning money to people who have just come out of bankruptcy.
Once again, you’re borrowing money secured by an asset and although you will definitely pay a higher interest rate, you will definitely be improving your credit rating if you make your payments on time.
Fourth, if you want to borrow money without paying higher interest rates, consider asking a relative with a high credit score to co-sign a loan with you. If you make the payments on time you will get the benefit of the improved credit rating without paying those high rates charged to credit risks, such as yourself. Think about this alternative before you ask anyone. Remember, if you fail to make a payment, your relative will be negatively impacted.