Life After Bankruptcy

If you're recently bankrupt, there are a few things you need to know to speed up your recovery.

Most of these little tidbits will apply, whether you filed a Chapter 7 bankruptcy, or a Chapter 13 bankruptcy.

Or, if it's been a while since your bankruptcy, you can use the following information to gauge your progress.

Here are five common sense steps to get you on the road to recovery:

1) Begin Paying Your Bills Early...Worst-Case, On Time

Stop paying bills late. Draw a line in the sand and say..."No more! All bills from this point on will be paid early...worst-case, on time."

2) Avoid Finance Companies

Credit from a finance company is not good. Not only is it very expensive, having finance companies appear on your credit reports lowers your FICO credit scores (which makes everything else more expensive).

3) Just Say, "No," to Co-Signers

You don't want to have co-signers for several reasons.
First, it's not a wise thing to do. You put the co-signer's credit on the line if something goes wrong. In addition, having co-signers appear on your credit reports weakens your position with future lenders. When a new lender sees you've had a co-signer, they'll consider you a greater risk and they may ask for a co-signer for their loan as well.

4) The Word "No" Means Nothing

You've got to get in your head that the word "no" means absolutely nothing. So if a car dealer tells you, "There's no way you'll be able to get financed for a car loan after bankruptcy, you shouldn't believe him. If a mortgage broker laughs at your goal of owning your first home instead of renting...laugh right back at her.

5) Discover the Power of Asking Open-Ended Questions

When a lender tells you, "No,"...don't stop there! You'd be missing out on the best part of the experience. You need to ask some very important questions, like...

"What would you do if you were me?"
"Since you can't help me, where would you go if you needed to get financed?"

Asking open-ended questions like these helps you find the people you should've been talking to in the first place.

In order to be approved for credit at low interest rates and good terms, you're going to have to be properly prepared to complete a credit application.

Here are a few rules to follow...

Rule #1 - Create a "credit folder"

A credit folder is simply a file that contains the vital information you need in one place that will allow you to complete each credit application completely and consistently.
Some examples are:

1)Bankruptcy discharge letter
2) Credit report
3) Bankruptcy petition
4) Previous credit applications after your bankruptcy
5) Facts about you, your spouse, and your nearest relative.
6) Summary of newly established credit
7) Letter of explanation about why you filed bankruptcy.
8) FICO credit scores.

Rule #2 - Complete every question

Unanswered questions on a credit application plant seeds of doubt in lenders' minds. It's best to answer each and every question. And if a particular question doesn't pertain to you, just write "not applicable" or "N/A."

It will be important to be accurate. If you come across as being accurate in your application, lenders may assume you're as precise in everything else.

Rule #3 - Skip the, "Have you ever filed bankruptcy?" question

I'm not asking you to lie. I'm telling you to ignore the question. This is the only time it's OK to violate rule number 2.

However, if they do ask you why you didn't check the box, then it is your responsibility to be honest with them and tell them you filed bankruptcy.

Rule #4 - Don't raise red flags

There are factors that can weaken your opportunity to get approved for new credit when completing an application. Here are a few of them:

- A previous bankruptcy
- Tax liens that are settled, released or not released
- Outstanding collection accounts
- Credit counseling narratives
- A high-debt-to income ratio

Rule #5 - Always complete the credit application at home

Don't be rushed or intimidated into filling out a credit application on the spot. Take the application with you. Fill it out in its entirety at your leisure. Then fax, mail or drop it off at a later time.

You just need to know how to make your application as strong as possible. By not raising any red flags and focusing on the steps mentioned above you can accomplish that.