If you are debating whether to file bankruptcy, you are probably asking yourself, “Will I be able to establish credit after my bankruptcy is discharged?” While many of your existing creditors would like you to believe that filing bankruptcy is like wearing a permanent scarlet letter on your credit report, which is not the case. It is possible to have good credit after bankruptcy. The myth that a discharge will prevent you from ever getting credit again is one that is created by creditors that want you to pay off your debts rather than file them. Understand what you may experience with your credit after filing bankruptcy and make an informed decision to file responsibly.
In today’s very capitalistic society, businesses are in the finance industry to make money. The higher interest they can charge a customer the better. With so many different companies dealing in the finance industry it will not be difficult to find a credit card company or a loan provider willing to give you the money you need for higher interest rates. When you are first rebuilding your credit after bankruptcy, you should expect to pay extremely high interest rates. This comes with the territory. As you prove you are a responsible borrower you will find lower interest rates and better loan terms.
Right after your bankruptcy is filed, you should expect to receive floods of loan offers and credit card offers in the mail. This may seem astonishing, however, when you understand why you can disprove the myth that all bankruptcy filers are doomed. Right after your bankruptcy is discharged, you are free of debt. This is perhaps one of the main reasons why prospective lenders try to fight for your business. When potential borrowers have no debt, they can qualify for higher loan amounts and credit lines that will make the lender or finance company more money over time. Because you are in a better position to repay the company, the company is willing to finance a high-end vehicle or a recreational vehicle you may have never dreamed of before bankruptcy.
Another reason why credit after bankruptcy is attractive to lenders is because you are considered a lower risk. When you file bankruptcy, you are not eligible to file again for at least 7 years. This means the lender is virtually guaranteed payment because the borrower does not want to blemish their credit again. When a lender is sure you will be their customer for at least 6 or 7 years without filing, they are willing to give you a chance to re-establish your credit while making a profit.
It is important to realize that you will have to pay more money in interest when you re-establish credit after bankruptcy. Only accept some of the offers you receive so you keep your debt to income ratio low. As long as you make your monthly payments each month and you avoid paying off your debt too quickly, you can maintain good credit even after filing bankruptcy.