Credit Report FAQ
Frequently asked questions about credit and credit reporting after filing bankruptcy.
Yes! For many people, Bankruptcy is the first step to ending the cycle of penalties and missed payments and building strong credit. Most of our clients receive a flood of new credit card offers after their Bankruptcy, since companies know that your prior debts are discharged and you cannot file for Bankruptcy again for a certain period of time. Although credit is available, we advise our clients to pay attention to the interest rate and terms of the offers they receive, since some lenders will offer higher interest rates because of your recent bankruptcy. We support our clients in rebuilding their credit with simple steps that lead to excellent credit after Bankruptcy.
What will my credit report be like after bankruptcy?
After Bankruptcy, your credit report will state that you were in a Chapter 7 or Chapter 13 Bankruptcy for up to 10 years. Accounts that are included in your Bankruptcy are closed and can be reported as included in bankruptcy for up to seven years.
Our clients tell us that after completing bankruptcy, their credit score drops, but then rises while the bankruptcy is still being reported. Thirty percent of the total credit score is based “credit utilization”, which is the percentage of available credit that has been borrowed. At the end of the Bankruptcy process you will be discharged of your debts and given a “clean start”, meaning no credit and no debt! As soon as you are approved for credit after Bankruptcy, this part of your score will increase right away.
Absolutely. Many of our clients tell us that lenders are eager to offer them new credit for several reasons.
- First, auto lenders know that our clients often have more available income after Bankruptcy, since they no longer have to make payments on the debts that were discharged. More available income means a greater ability to make car payments.
- Second, auto lenders are able to look past Bankruptcy, since they are protected against default by keeping a security interest in the car until it is paid off. That means that if you stop paying or go into Bankruptcy in the future, that their debt gets better treatment than regular credit card debt.
- Third, our clients tell us that lenders in general do not view Bankruptcy as negatively as they did in the past. This could be due to changes in the Bankruptcy code, or a change in the economy that makes credit more available, but our clients report that buying a car after bankruptcy is usually not a problem.
If you do decide to finance a car after your bankruptcy, we recommend that our clients are mindful of the interest rate that you are offered. Even though credit is available, some lenders will view the Bankruptcy as a negative mark and require a high interest rate on the loan.
When should I get a new car?
We typically advise our clients to wait until after your bankruptcy case has been closed and your debts are discharged. Chapter 7 cases are often completed in about three months. Chapter 13 repayment plans must be completed before the case is closed, which can last up to five years. Clients that need to purchase a car before their plan is completed must call our office so we can request permission from the court.