You claimed bankruptcy and now you think you can’t secure any new credit for 10 years. We are here to tell you that’s a myth! While the BK will sit on your credit report for the next 10 years, it doesn’t prohibit you from getting new credit. If you are ready to start over, use the following steps to get the unsecured loan you need to reestablish good credit.
Evaluate Your Credit Report
The first thing you should do is pull your credit report from each of the three credit bureaus. If you haven’t pulled your reports yet this year, you can obtain a copy of them here free of charge. Once you have the reports, go over each account carefully. Compare the reporting accounts to your BK papers. Are the accounts included in the bankruptcy wiped clean? If accounts are reporting past due or with a balance that was included in the BK, contact your BK attorney or file a credit dispute to get the situation fixed.
Establish New Credit
If you wiped the slate clean, you’ll need new trade lines to prove that you can pay your bills on time now. The easiest trade line to establish is a secured credit card. Your credit line is equal to the deposit you put down on the card. If you fail to make your payments, the credit card company keeps your deposit. This is an incentive to pay your bills on time. Your ultimate goal, though, is to establish a good credit score, so it works to your benefit to pay the bills on time. If you can, pay the balance off in full each month to show that you are no longer a high-risk borrower.
Lenders are going to be understandably wary about giving you a loan after a bankruptcy. If you can save money alongside establishing good credit habits, you can put their minds at ease. Make paying your savings account a normal part of your monthly budget to help you reach your goal. There isn’t a specific amount of money you must save, but obviously the more money you have, the better your chances of approval become.
Maximize Your Income
If you have other income streams than your main job, make sure the lender knows about it. Maybe you have a side job or you received a raise at your primary job. You can also include money your spouse makes or money you receive for child support or alimony to help your case.
Apply With Different Types of Lenders
Don’t restrict your search for an unsecured loan to your local bank. Many banks automatically turn down loan applications for those that have a recent bankruptcy reporting. A few other options you can try include:
- Credit unions
- Online banks
- Peer-to-peer lenders
Each of these entities often has more flexible underwriting guidelines that allow a BK as long as they see improvement in your financial status. It also helps if you have compensating factors, such as a low debt ratio, increasing income, or cash reserves.
Getting an unsecured loan after a bankruptcy isn’t impossible; it just takes a little more work on your part. The best thing you can do is shop around with different lenders. For example, apply with an online lender, credit union, and peer-to-peer company. This way you can compare your offers and determine which one is the most affordable with the best terms.