After your bankruptcy has been discharged, being in the post-bankruptcy phase is interesting, to say the least. Your finances are hopefully in better shape – but your credit score, maybe not so much. There are lenders able to assist post-bankruptcy borrowers if you know where to look, though.
Welcome to Post-Bankruptcy!
Receiving your discharge papers after you completed your bankruptcy may have come with a wave of relief – congrats! But if you’ve reviewed your credit reports recently, you may have also been handed a tarnished credit history and lower credit score as a result.
Filing for bankruptcy, even when it's completed successfully, can really do a number on your credit score. Some borrowers experience a drop of around 200 points or more if they filed for bankruptcy with a good credit score.
If you filed for Chapter 13, your credit reports reflect this for seven years starting from the date you filed. If you went with Chapter 7, the bankruptcy stays on your credit reports for up to 10 years. This may seem daunting or feel like forever, but your credit reports do heal over time.
In the meantime, a poor credit score coupled with a recent bankruptcy discharge can make it tough to find a lender when you need a vehicle. Banks, credit unions, captive lenders, and even some online auto lenders, typically require a higher credit score and a clean credit report to qualify for auto financing. However, there are bad credit lenders that specialize in assisting post-bankruptcy borrowers.
Post-Bankruptcy Auto Loans
When you need a vehicle soon after a bankruptcy discharge, starting with a special finance dealership may be the way to go. These dealers are signed up with subprime, or bad credit, lenders. While your credit reports are still considering during the approval process, it’s not the only thing subprime lenders consider.
After your bankruptcy has been discharged, you can typically get into a car loan rather quickly with a subprime lender. If the discharge hasn’t appeared on your credit reports, then you likely need to bring a copy of your discharge papers with you to the dealership. This lets the lender know you’re post-bankruptcy since a discharge can take a month or so to hit your credit reports.
While bankruptcy may have left its mark on your credit score, it typically isn’t enough for a subprime lender to turn you away for financing. Instead of just using your credit score to determine your eligibly for vehicle financing, subprime lenders examine more of your financial stability by looking at your work history, overall credit history, residency stability, income, and down payment amount.
If you have the documentation that proves you’re stable enough to repay a car loan – check stubs, utility bill, driver’s license, down payment – then you could be on your way to vehicle financing and credit repair.
Healing After Bankruptcy
While negative marks on your credit reports can lower your credit score for the first few years, after each passing year, that bankruptcy filing’s impact lessens. The longer it’s been since your bankruptcy, the less it harms your credit.
In addition to the passage of time, taking on new credit that you can handle improves your credit score as well. Car loans have the potential of supplying years of payment history, since they’re usually around four and eight years long. If you make all your payments on time, avoid default, and complete the loan successfully, your credit score could improve greatly.
Subprime auto loans are reported to the credit bureaus. If you seek out a subprime lender and are eligible for vehicle financing, you could turn your credit reports back around post-bankruptcy.
Post-Bankruptcy Auto Lender Connections
Locating a special finance dealership with subprime connections can be tough – they may not have their financing partners listed on their showroom windows. But here at The Car Connection, we’ve been connecting borrowers to dealers for over two decades, and we want to help you, too.
Get started on your path to post-bankruptcy credit repair with the vehicle you need by using our free car loan request form. Once you complete it, we’ll look for a dealership in your local area that’s ready to assist bankruptcy borrowers.