||Ask Dr. Don
Starting over after bankruptcy
Dear Dr. Don,
I filed bankruptcy last June, 2003. It was discharged
in August. I applied for a Capital One credit card and received
one. I applied for a cell phone contract from Sprint and received
one (was actually offered two), but when I apply for other things,
I get turned down. Why is that and what can I do to get my credit
back on track after my bankruptcy?
The best way is to lay low for awhile and stop applying for credit
all over town. Those applications stay on your credit report for
two years. Every time you get turned down, it makes it that much
harder for the next lender to approve your application. It's been
less than a year since your bankruptcy was discharged. Lenders aren't
going to welcome you with open arms.
You've got a credit card. What are you trying to accomplish
by getting more credit? To improve your credit history, it's much
more important for you to focus on living within your means and
staying current on your bills than it is to start building a new
house of cards.
Bankrate has partnered with myFICO to offer a FICO
Score Estimator that will give you a read on your current credit
score. You're in a rebuilding phase when it comes to your credit.
Don't be so anxious to rush this process. Stay current on your bills
and wait at least until you get past the one-year anniversary of
your bankruptcy discharge before you apply for credit again.
Dear Dr. Don,
I am a 62-year-old woman who just went through a three-year bitter
divorce. My only income is alimony. My husband decided with the
guidance of his attorney to declare bankruptcy and wipe the slate
clean. I had no intention of doing the same, but was advised that
if I did not, I would be responsible for his debts and haunted for
the rest of my life. As a result, I declared bankruptcy.
Now, I am left with nothing. I need a new car and
there is no one who will lend me the money to buy one and I am desperate
as to what to do. I thought I was starting over and all would be
well with the world and now I am in worse shape than I was before.
And the outlook doesn't look better, it looks worse. What can I
You got good advice concerning the bankruptcy. Any joint loan obligations
taken on during the marriage would have become your responsibility
after he declared a Chapter 7 bankruptcy. It will take some time
to rebuild your credit, but it won't take the 10 years that the
bankruptcy remains on your credit report.
If you have a friend or family member who is willing
to co-sign the loan, that could get you past the credit issues arising
from the bankruptcy. It's a big obligation on the part of the co-signer
because they're agreeing to make the payments if you don't.
Without a co-signer, the longer you can postpone the
car purchase, the more distance you put between you and the bankruptcy
discharge date. Two years is the rule of thumb, but at least a year
There are plenty of reputable lenders that are willing
to loan to people with problem credit. In fact, you should shop
for a lender before you shop for a car. Too often car dealers take
advantage of people with problem credit by making them pay top dollar
for the car as well as an exorbitant interest rate. It's a recipe
for financial failure.
Householdauto.com is currently featured on Bankrate's
Credit Lenders page, but E-Loan and other lenders can also arrange
financing for people with problem credit.
Look at buying used or off-lease vehicles to
reduce the price of the car and the cost of financing that car purchase.
Spend some time on Bankrate's
Auto Channel to learn more about buying new or used.
-- Posted: April 16, 2004