While it can be difficult to obtain credit from high street banks and building societies following bankruptcy, it can often be found in other places. However, some institutions take full advantage of the position people find themselves in following bankruptcy and exploit the fact that credit is not easily found. It goes without saying that these kind of lenders should be avoided as much as possible as in the long run they could well be more trouble than they are worth. Credit Unions can offer help to people who find themselves in poor credit situations but needing to borrow. Most towns have a Credit Union and it may be that they have a shop front that you have walked past on a daily basis without even noticing it is there.
While banks and building societies are tied by lending rules, Credit Unions have more flexibility when it comes to deciding who they lend to. It is this flexibility that means they are able to offer financial assistance to people who are in need having come out of bankruptcy. It is possible to find much more favourable lending rates and loan deals through your Credit Union than you would through a specialist high risk lender, and because it is much more personal process, all of your circumstances are taken into account when deciding whether or not it is viable to lend to you. The kind of high interest rates and low credit limits that are generally associated with specialised high-risk lending companies are not necessarily the norm when it comes to Credit Unions as they decide their own terms and rates depending on each individual situation.
Credit Unions can offer more than just a loan, they can give you help and support during what may well be a difficult time, both financially and emotionally. They can help you find the right way to re-build your credit rating, build up a good credit history and payment history and make yourself a much better prospect for future lenders.
Finding your Credit Union should be simple enough, either in the phone book or online and talking to them about your circumstances and explaining what kind of help you need could be the first step to getting yourself back on the road to financial recovery.
While it can be difficult to obtain credit in the first year or so following bankruptcy, it isn’t impossible and there are companies out there who specialise in this type of lending. Before you start looking into applying for any kind of credit, it is important to look at why you feel the need to get back into debt following bankruptcy, credit is going to be available to you but at a price.
There are different types of high risk lending, it can be in the form of a loan or a credit card and can be secured or unsecured. Depending on the amount you want to borrow, what you want it for and how much of a risk the lender deems you to be will determine the type of credit you are offered. Any credit that is offered to a borrower considered high risk will come with it’s own terms and will undoubtedly have a higher interest rate and stricter terms than credit that is available to those with good credit ratings.
However, there are advantages in taking out any of these types of credit, as it allows you to re-build your credit history and improve your credit rating over time. It may be that you are able to take out a loan and get a slightly lower interest rate by securing it on your home, as this gives the lender a form of security, of course if you do this and fail to keep up with your payments then you are putting your home at risk. Unsecured lending comes at a much greater risk to the lender so the interest rates and criteria are going to be stricter, as there is nothing to stop you defaulting on the loan and leaving the lender with no form of recompense.
Bankruptcy doesn’t have to mean the end of being able to obtain credit, it just means that you will be find yourself in a different category of borrowers, that has a different set of criteria to fulfill when it comes to applying for credit. If you are able to maintain a good payment history over a period of time then it won’t be too long before you find yourself moving out of the high-risk category and back into the more favourable bracket of credit ratings, meaning lenders will no longer view you as a high-risk and only offer you products that come with at a premium rate.
Having been through bankruptcy, credit can be difficult to obtain for some people, and trying to get a good credit score back is very important for most. There are some potential pitfalls when doing this, and they can cause a lot more damage than many people think.
As you are probably already aware, Chapter 13 bankruptcy will stay on your credit report for 7 years from the date it is paid in full, or 10 years if not paid in full, Chapter 7 Bankruptcy stays for 10 years from the date of filing or the date of bankruptcy decree. There are many companies that offer their services to people who have gone bankrupt, claiming that they can quickly either repair your credit report or remove the bankruptcy completely. Avoid these guys at all costs, their practices are at best very dodgy and at worst highly illegal.
For example, any company that offers post-bankruptcy credit repair services but wants payment prior to providing you with any of their services is breaking the law. Stay clear of credit repair companies that won’t tell you your legal rights, or offer you any advice on how you can help yourself, without incurring charges. Likewise run a mile from any supposed credit repair agency that tells you not to contact any credit reporting companies directly, or a anyone that advises you to dispute everything held on your credit report.
Possible the most dangerous tactic employed by many of these so called credit repair companies, is suggesting you create a new credit identity which of course will have a new credit report, by applying for an Employer Identification Number to use instead of your Social Security number. This is against the law and if you follow such advice and effectively commit fraud, you could find yourself facing prosecution, possibly even jail.
Bankruptcy doesn’t necessarily ruin your credit report beyond repair, in fact the financial circumstances leading up to your bankruptcy are probably the most damage your credit report will experience. It is possible to repair your credit report following bankruptcy, although it will take a little bit of time and effort.
One of the first things to do is obtain a copy of your credit report to make sure that it is correct, and that the details of your bankruptcy have been recorded properly. It is common to find that accounts that have been closed off during bankruptcy proceedings are still showing as open and in arrears, so it is down to you to contact the credit agencies and have them record these accounts correctly as closed. It is also important to make sure that the bankruptcy discharge shows on your report, this will allow any potential new creditors to see that your old creditors have no legal claim remaining. Making sure your credit report is accurate is the first and most important step to getting it back on track.
It is important to remember that when you apply for credit, you give that company permission to search your credit report, and in doing so they leave a “mark” on your account, depending on what is being searched for there are different types of marks. If the search is carried out purely to confirm your identity then there will be an “identity check mark” left, if the search is in relation to obtaining new credit then a “new credit mark” will be left. These can stay on your record for up to two years and can help identify if people are trying to apply for credit they cannot afford or even for fraud detection. This is why you should not apply for dozens of credit cards or loans in one go, too many marks on your record in a short space of time will flag up with most creditors and will sound alarm bells for them. If you are trying to apply for a credit card in order to start re-building your credit history then take your time. Wait to see the outcome of your application, if it is a rejection then give it a week or two before trying another company. Patience is something that is invaluable when trying to get post-bankruptcy credit, slowly but surely is the only way to get your credit report back on track.
Many people mistakenly believe that they will be unable to obtain any sort of credit following bankruptcy. However this is not the case. With careful and thorough management of your credit records you should be able to obtain credit within a matter of months following your bankruptcy.
One of the most important things to do when you are coming out of bankruptcy is to check your credit report. A problem that many people find they are facing is that their credit reports often show accounts that were closed during the bankruptcy proceedings as open and overdue. This is very damaging for your credit score and you should contact the credit agencies immediately to insist that the accounts in question are properly reported as “included in bankruptcy”. While you have your credit report it is a good idea to check it thoroughly to make sure there are no other mistakes or mis-reported accounts on there as your credit report is used to formulate your credit score so it is vital it is correct. This is the first step to repairing your credit rating.
Once you have your credit report in order, the next thing to do is try and get some form of secured credit, such as a credit card. This may seem a little crazy, but by having some form of credit you will be able to build a good credit history on that account to prove that you are not a high risk borrower. It may well be the case that any kind of credit card you will be able to get will have high interest rates and low credit limits. This doesn’t matter as the last thing you actually want to do is get in debt again. You need to use this card very wisely and pay the balance off every month, just use it once or twice a month on small purchases, but most importantly of all, make sure you have the money to pay it at the end of the month. There is no point in using this kind of credit repairing tactic if you are just going to run up more debt. You absolutely must pay it off every month, this way you show you are a good debtor.
You will find that around 2 years after bankruptcy discharge you will qualify for loans on the same terms as those who have not been bankrupt, and you may well be able to cut that time down by a few months by sensible use of a credit card in order to improve your credit rating.
