Bankruptcy can cause a terrific decrease in your credit score and stay on your credit report for ten years. Buying a car after bankruptcy discharge can help you to reestablish your credit and give you a new start immediately.
After a bankruptcy discharge there are some things you can do to make purchasing your next vehicle a little easier. Read further to learn how to increase your chances of buying a car after bankruptcy.
Pull your Credit Reports from All Three Bureaus
After the bankruptcy has been discharged obtain a credit report from each of the three credit bureaus. The three companies that determine your credit score are Equifax, Transunion and Experian. Read through the reports and check to make sure all debts included in the bankruptcy have been removed from your report.
Write letters of explanation to each of the three credit bureaus, asking them to attach the letter to your credit report. These letters may not forgive your past financial mistakes but potential future lenders will take note. These explanations may make a difference to the lender when they review your request for a loan. This is especially true if you had a positive report prior to an unexpected loss of income for any reason.
Stash Some Cash
Buying a car after bankruptcy discharge may require you make a down payment on the vehicle. Filing bankruptcy puts a person in the high-risk category when it comes to lenders. By putting a good size down payment on the car you may have a better chance getting the lender to say yes to your loan.
Look over your monthly bills and see if there is some way to stash a little extra cash here and there. Consider such things as eating out for dinner only once a month instead of once a week. Take the money you save and put it in a savings account towards your new car. Instead of going to the movie theater, maybe you could rent a movie and pop some popcorn at home. Again, put the money you save into the savings for the down payment on a new vehicle.
Consider a Co-Signer
It is a possibility that when buying a car after bankruptcy discharge you may require a co-signer. This is someone who will sign the loan paperwork with you, allowing the lender to loan you the money for a car.
A co-signer is someone who trusts you to make the payments on time. This is because the co-signer is assuming responsibility of the payments should you default for any reason. The loan will appear on this person's credit report as if it was his own loan.
Late payments will be documented on his credit score in addition to yours. Therefore, to preserve a close relationship with your co-signer you will want to do all you can to pay the loan back on time and communicate any issues with the co-signer.
Buying a car after bankruptcy discharge can help to give you a new start. Determine which route is best for you and your situation and begin rebuilding your financial future now.