So your finances were out of control, and you filed bankruptcy. You went to your 341 hearing (also called meeting of creditors, or bankruptcy court date) and you might have even discharged by now. It does not really matter if the circumstances that caused you to file for bankruptcy were your fault, someone else’s fault, or no ones fault at all. You now have a bankruptcy on your credit, and every debt included in your bankruptcy more than likely looks ugly on your credit report. What’s next? For most people that have gone through bankruptcy, the next step is re-establishing your credit.

Re-Establishing Credit After Bankruptcy

Most people I talk to in the financing industry consider a reestablishing loan one of more than $5000 paid over a period of 12-24 months after a bankruptcy. The important part of the credit reestablishment
process it that the loan is taken out after your bankruptcy filing. The reason for this is you are trying to show the lenders that your bankruptcy is behind you, all of the things that made it impossible for you to pay your bills are now in your past, and you are starting over with a new part of your life. A part of your life that you are going to pay all of your bills on time.

It would be great if a lender would give you a $5,000 signature loan, and you could just reestablish your credit with a nice low payment on that. The problem for most people that have gone through bankruptcy is that lenders do not want to give them a signature loan. If the debtor defaults on the loan, then they have no collateral to go after. It is for this reason that most people re-establish their credit with a bankruptcy auto loan.

What about credit cards?

Credit cards do very little to help people re-establish their credit after bankruptcy. Most of the people that I see with credit cards after bankruptcy have credit limits between $300 and $500 dollars. The minimum payment is usually $10 to $20 per month. How much do you think a $20 minimum payment does to show a prospective lender that you are credit worthy after a bankruptcy? Not much. Credit cards are better than doing nothing, but keep in mind they tend to have annual fees and even if you do not use the card you will have a bill you need to pay from time to time for the annual fee. I have even seen people get credit cards to reestablish their credit after a bankruptcy, forget about the annual fees, and end up charging off their credit card after a bankruptcy so that their credit is much worse than if they had done nothing at all.

Do I NEED to reestablish my credit after Bankruptcy?

No. No one needs to do anything. Hopefully you realize that there are many things you will probably do in the future where you will be judged, at least partly, by your credit worthiness. Auto Loans, Home Loans, Renting a house or apartment, getting a retail store credit card so you can get 0% interest for a year or more. The list goes on and on. Most of the people we talk to should definitely consider reestablishing their credit.

Are there exceptions?

Of course. We see one or two people a month that have pretty good credit after their bankruptcy. We also see about 200 applications per month. Overall though, most people have already tried their local banks and credit unions before they apply with WashingtonAutoCredit.com. It is because they have already been turned down that they decide to try us. If you have any questions about reestablishing your credit after bankruptcy, call us at 360-412-4120 or apply for an auto loan online.