If you have filed for Chapter 7 bankruptcy in Indiana, you may wonder if you will ever be able to get another loan. The answer is yes, but it will take some time and effort on your part.
Here are some tips on how to rebuild your credit and qualify for a loan after a Chapter 7 bankruptcy.
Waiting period
Wait at least two years before applying for a loan. Chapter 7 bankruptcy stays on your credit report for 10 years, but most lenders will not consider you for a loan until at least two years have passed since your discharge date. This gives you time to show that you have improved your financial situation.
Building a new, positive credit history
During those two years and going forward, make sure to review your credit report for any errors or inaccuracies and dispute them, if necessary, and pay your bills on time and in full.
Paying your bills on time and in full every month shows that you are reliable and trustworthy. It also helps you avoid late fees, penalties and negative marks on your credit. If you have trouble remembering, set up automatic payments and reminders.
Build a positive credit history with secured or unsecured credit cards. A secured credit card is a type of card that requires you to make a deposit as collateral. A secured credit card can help you establish or rebuild your credit history.
An unsecured credit card is a regular card that does not require a deposit, but it may have higher interest rates and fees than a secured card. You may qualify for an unsecured card after using a secured card and demonstrating good payment behavior.
After those two years, do not immediately apply for a bunch of loans and credit cards. Every time you apply, the lender or issuer will perform a hard inquiry on your credit report, which can lower your score by a few points.
Too many hard inquiries in a short period of time can make you look desperate for credit and hurt your chances of getting approved. Only apply for loans and cards that you need and can repay.
Save money for a down payment or collateral. Depending on the type of loan you want, you may need to provide some money upfront as a down payment or collateral. This gives the lender some security. Getting a loan after Chapter 7 bankruptcy is not impossible, but it requires patience, discipline and planning.
