Bankruptcy definitely leaves an undeniable black streak on your borrowing reputation. After all, you have just demonstrated your willingness to walk away from your financial obligations and turn your back on banks and lenders who have trusted you to pay. Rebuilding your borrowing reputation following bankruptcy is a difficult task that takes time and patience, but it can be done and you can eventually qualify for unsecured loans following bankruptcy.
How You Are Seen By Lenders Now
To understand how your credit works following bankruptcy, think about how the lender no sees you. Remember, loaning money is nothing personal for a bank; it is all about numbers and whether or not loaning money to you can help the lender to make money. He does not want to lose money, obviously. So when he sees an applicant that has freshly filed bankruptcy and had the bankruptcy discharged, he is on alert.
But he also takes other things into consideration. The first thing that your lender realizes is that it will be many years before you can file bankruptcy again – that is the law. You can only file bankruptcy again after a significant amount of time has passed. In fact, depending upon the chapter of bankruptcy that you file, you may not be eligible to file again for another six years. So the lender knows that you won’t be able to walk away from short term loans. The next thing the lender will ask is whether or not you have a stable job.
He will take this into consideration because if you are a person with a good work history, he will have the ability to remediate if you fail to pay him after extending credit to you; in other words, he can garnish your wages after getting a default judgment. Your slate is clean after bankruptcy, and the lender sees a hard working person with a steady work history that all of a sudden has no debt whatsoever – so he jumps on the opportunity to take your money. Keep in mind that he will charge you more interest than he would if you had a clean credit history, but you can still borrow money.
Sooner Rather Than Later
Another factor that many lenders will take into consideration when a post bankruptcy applicant is looking to borrow money is whether that applicant can pledge collateral. Do you still own your home? Do you own a late model vehicle? Both of these are useful properties to pledge as collateral, which is an added incentive for the lender to loan you money, regardless of your negative credit history. To further your application for an unsecured post bankruptcy loan, you can also apply with a creditworthy cosigner who has a proven track record as a borrower. Your cosigner can be anyone who is willing to make your unsecured loan payments if you fail to do so.
Road To Recovering From Bankruptcy
The road to recovering from bankruptcy is not a straight and narrow one. You have made a mess of your credit, for whatever reason, and now is the time to rebuild your credit and become a good steward of credit that is extended to you. Start slowly and do not bite off more than you can handle at one time. Take this opportunity to look at any bad spending habits that you might have had, or unwise choices that you might have made that caused you to end up filing for bankruptcy in the first place and do your best to avoid those same mistakes again.