Personal loans after bankruptcy can be surprisingly possible |
By David Pilley on July 21, 2011
.jpg.aspx?width=75&height=75) To your credit score, a bankruptcy is the most damaging item. Filing for bankruptcy simply means that you’re walking away from the debt you have accrued. Lenders will see the bankruptcy on your credit report and think that you will be a risk. “If this man/woman needed federal help to get out of these past loans, how can I be sure the next loan will not also end in the same result?” they might wonder. Getting a new loan after bankruptcy is not easy, and you shouldn’t be eager to do so right off the bat.
The most important thing to do after filing for bankruptcy is find ways to improve your credit score. How can you do this? Well, just like with any bad situation, time helps. The older a delinquency on your credit report is, the lower the impact it has on your score. The items also don’t stay on the report for the rest of your life. Bankruptcy generally stays on the report between seven and ten years, and your credit score will improve when it is removed.
But seven to ten years is a long time. You have a life to live, and it would be extremely difficult to wait that long to let nature run its course. You can be more proactive in improving your own credit score by dealing with your other debts. Student loans and child support are two types of debts that bankruptcies do not cover. Instead of thinking about a new loan, first try fixing these overdue loans, if you have them. Taking out multiple loans and not being able to pay them back was what got you in hot water in the first place, so instead of jumping at the first new loan offered to you, work on the loans you have that were not covered in the bankruptcy.
Any loan offered to you right after you have filed for bankruptcy will have a high interest rate. A good type of loan that may improve your credit score is a secured credit card. A secured credit card puts an amount of money up for collateral while you set up a line of credit on the account. The amount of credit on the card will be small, typically between $500 and $1,000, and the collateral you pay into the card may end up being more than the card’s credit limit. If you use home equity as collateral, it could be risky if you default, so using cash for collateral is suggested. Most banks and lenders offer rewards if you are responsible with a secured credit card. After a specified point of making timely monthly payments, the bank or lender may add more credit or reimburse you with the collateral, turning the account into an unsecured one.
Getting loans after bankruptcy is neither easy nor immediate. If you tackle what was not accounted for in the bankruptcy and then take small steps with a secured credit card, your credit score should be on the way to improvement.
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