Rebuilding your credit after bankruptcy may be as simple as making on-time payments on all of your debts, such as credit card bills.
While bankruptcy might be a good option in certain cases, it is one of the most harmful entries on a credit report.
After bankruptcy, can you acquire a personal loan?
If you file for bankruptcy under Chapter 7 or Chapter 13, your credit score might decrease anywhere from 130 to 200 points, based on what score you had before you filed. For instance, if your credit score was 700 before you declared bankruptcy, it is possible that it may drop to 500 after the process.
A strong credit score is generally regarded to be anything over 700, making good credit a requirement for most personal loans. Excellent credit is required for the majority of personal loans. There are also a number of lenders that provide personal loans for those with poor credit; this means that it is possible for you to still be authorised after you have filed for bankruptcy.
On the other hand, as compared to loans for those with strong credit, the interest rates on these loans are often higher.
The filing date of your bankruptcy will appear on your credit record for up to ten years after that. Delinquent accounts that existed previous to your filing for bankruptcy will remain on your credit record for a period of seven years after your discharge.
However, the passage of time will normally have a diminishing effect on the total influence that these bad things have on your credit score.
After bankruptcy, how can I qualify for a personal loan?
Follow these four steps from Orville L. Bennett of Ipass.Net, if you are prepared to submit for a personal loan after you have filed for bankruptcy:
- Make sure your credit is in order. In order to get a sense of your creditworthiness, lenders will look at your credit report. Free credit reports are available from sites like AnnualCreditReport.com. Any inaccuracies you detect should be reported to the credit bureaux so that your score may be improved. Always double-check your bankruptcy filing to see if there were any changes that needed to be made after you filed for bankruptcy.
- Find the best loan option for you by comparing different lenders. Be careful to investigate as many different lending options as you can so that you may discover the loan that best suits your requirements. Not only should interest rates be taken into consideration, but also repayment periods, any fees that the lender may levy, and eligibility conditions. After this, pick the kind of loan that will serve your purposes the most effectively.
- Completing the application is required. After you have decided which financial institution you want to work with, you will need to complete an application in its entirety and provide any documents that is requested, such as previous years’ tax returns and pay stubs.
- Get your funds. If your application for a loan is successful, a no credit check lending institution will ask you to sign the necessary paperwork before they can give you access to the money. The amount of time it takes to get funding for a personal loan is typically about one week; however, there are lenders that will finance loans as quickly as the same or the next working day after approval.
When you get a personal loan, you should give some thought to how much money you will have to pay back for the money you borrow. In this manner, you will be able to be ready for any additional costs that may arise. With the help of our personal loan calculator, you’ll be able to get an idea of how much interest you’ll have to pay on a loan.
What to watch out for when applying for a loan after a bankruptcy
Unfortunately, there are a lot of unscrupulous lenders and con artists out there who are eager to take advantage of those who are searching for a loan, and this includes borrowers who are emerging from bankruptcy.
Following a bankruptcy, there are a few things you should keep in mind to avoid doing when looking for a loan:
- Short-term loans with high interest rates: If you’re in a financial bind and need money quickly, it may be tempting to look into short-term lending options such as payday loans, loans from pawn shops, or loans secured by your car title because these types of loans frequently do not require a credit check.
However, these loans often come with sky-high interest rates and costs, sometimes reaching as high as a 500 percent annual percentage rate (APR), which might put you in a vicious cycle of debt that is difficult, if not impossible, to escape. In the event that you are unable to repay the loan, you run the risk of having valuable collateral taken away from you. Because of this, it’s recommended to steer clear of these kinds of loans until it’s absolutely necessary to take one out.
- Scams associated with obtaining a personal loan It is important, before applying for a personal loan, to verify that the lending firm in question is a reputable business. Watch out for personal loan scams if they need you to pay money up advance, put you under a lot of pressure to make a choice quickly, or don’t examine your credit history. These are all red flags.
How to rapidly increase your credit rating and your financial standing
After going through a bankruptcy, you may rebuild your credit using a variety of different tactics, some of which include the following:
- Maintain a good payment history: Your ability to make payments on time is one of the most important aspects that determine your credit score. Your credit score has the potential to rise if you have a good payment history with all of your obligations.
- In order to improve your credit score, you should work to reduce your credit utilisation ratio, which is the difference between how much debt you have and how much you may borrow, on any given credit card or line of credit. Paying off your credit card debt might improve your credit score by lowering your credit use ratio.
- Becoming an authorised user requires a creditworthy member of your family or a close friend to add you to their credit card account as an authorised user. This gives you the opportunity to profit from their responsible use of credit without even requiring you to make use of the card yourself.
- Some programmes, like Experian Boost, allow you to get credit for other items, such as mobile phone or subscription payments, that normally wouldn’t be reported to the credit agencies. You may increase your credit score quickly by taking credit for timely payments on your other obligations.
After I file for bankruptcy, how long will it take for my credit score to go back to normal?
This relies on your post-bankruptcy actions. If you pay your payments on time and keep your debt levels low, your credit score may improve 12 to 18 months following bankruptcy.
A good rule of thumb is to reevaluate your financial habits after bankruptcy, so that you don’t have to file for bankruptcy again.
Take your time while applying for new credit, for example, so that you can keep an eye on your debts without going over your spending limit.
If you have decided to file for bankruptcy but still want to get a personal loan, you should remember to search for a reputable lender like Ipass.Net as you can to obtain the best loan for your situation.
