Working with Lenders: How Bankruptcy Affects Your Ability to Receive Loans
It’s no secret that filing bankruptcy will have an effect on your credit score — and how quickly you will be able to rebuild credit In fact, filing bankruptcy will affect your credit score more than any other single event in your life. This effect, in turn, may put a damper on your ability to get a loan, whether it is a personal loan, educational loan, or a home loan. However, not filing bankruptcy and allowing your outstanding debts to pile up can also wallop your credit score as well. Getting a loan after bankruptcy may be harder than pre-bankruptcy, but it is not impossible.
Your Credit Score and Bankruptcy
Any negative financial event can cause your credit score to drop. Many scores fall between 160 and 220 points after a bankruptcy filing. This will make it challenging to get loans at a favorable rate. However, bankruptcy will not completely foreclose you from obtaining a loan in the future in most circumstances. Your rates may just be higher, and you may have to try a few lenders.
Your bankruptcy stays on your credit report for ten years after you receive your discharge. That means that any time a lender runs your credit report, it will see the bankruptcy filing. You can read more about how filing bankruptcy will affect your credit score here.
Discrimination Based on Bankruptcy
You do have certain protections against discrimination if you are filing bankruptcy. This is especially important if you are considering a loan from a government agency or entity, including getting loans for higher education. Government agencies are not permitted to discriminate based on your prior bankruptcy. They can, however, still consider your credit score when processing your application for a loan.
You also have some protections against private entities, but they are limited. Employers cannot punish or fire you for filing bankruptcy, but that is where the benefits end. You can legally be denied rental housing or loans based on your bankruptcy.
Getting a Loan After Bankruptcy
Having a good personal relationship with a local lender may be crucial in getting a loan after bankruptcy. Make sure that employees at a bank, credit union, or another lender know who you are and that they can trust you. Unfortunately, these relationships take time to build, and if you have not done so already, getting a loan with favorable rates can be a long process.
Interestingly, credit card companies may attempt to contact you frequently after a bankruptcy to encourage you to open a new line of credit. Offers of high-rate credit cards after bankruptcy are triggered by the fact that you cannot file for bankruptcy again for several years, and they know that you may be looking for credit options. Be careful with these offers, and check for annual fees and high percentage rates.
You likely will be able to get a car loan after bankruptcy, but the rates will be much higher. Auto lenders are not as concerned about lending to individuals after bankruptcy because your new car acts as collateral. If you do not pay your bills, it is a relatively straight-forward process to repossess the vehicle.
It can take years to qualify for a home mortgage, so you should be aware of this potential complication before you start the bankruptcy process.
If you are considering filing bankruptcy, schedule an appointment with Maxwell Dunn Law to discuss your legal and financial options. Our focus is not just on getting rid of your debt, but also rebuilding your credit after bankruptcy as quickly as possible. All of our clients receive our 720 Credit Score program which was designed to educate and guide you step-by-step through exactly what you need to do to build excellent credit. Regardless of your past, the key is ensuring that you are adding the right types of accounts and usage on those accounts moving forward. This program has been proven successful for thousands of people across the country with many achieving an “excellent’ credit rating in as little as 12-24 months. Call today to learn more about our 7 Steps to a 720 Credit Score program or click this link http://bit.ly/2doG7O9. We are accepting enrollments for our upcoming course now, so call to reserve your seat.