[MUSIC] Hi there, I’m Michael Bovee with
Consumer Recovery Network, and welcome to our YouTube channel,
DebtBytes. Today, I wanna talk about, How
to get credit, establish credit or get financing after
you’ve filed for bankruptcy. First of all, there’s a
misconception it’s abound, it’s prevalent about how bankruptcy
is a death sentence to your credit or your access to credit
for 10 years in the case of Chapter 7 because it appears on
your credit report for 10 years. So, this assumption or
this myth, if you will, is pervasive because of
how long it’s on there. And then in the case of Chapter
13, it’s on there for 7 years. But when it comes to Chapter 7
and how long you’re going to be unable to qualify for certain
types of loans and credit. There is a lot of
misinformation out there. So, when you file for Chapter 7,
it trumps all of the debt relief options usually,
as far as affordability, and time frames for
you to get out of debt. National average, $1500-1800,
somewhere around there for you Chapter 7 filing total. And, lets say you’ve
got $20,000 of debt. Paying that back in
a consolidation could mean $21-$22,000 that you
repay over five years. Settling that debt, assuming half-off, means you
have to come up with $10,000. Whereas, $1500 for
bankruptcy, possibly. It wins on a cost basis,
but guess what? It wins on a credit basis. So, when you file for Chapter
7 bankruptcy, and in today’s economy where we’re in and
out of a recession, who knows? It’s just job market and things
like that are challenging. In this economy legitimate
reasons to go out and get credit would include keeping
a roof over your head, so mortgage or maybe you
need to refi a mortgage. Take advantage of
the lower interest rate. A car for
dependable transportation. Absolutely necessary to get to
and from work to earn a living. And or education. Your own if you’re gonna
go back to school or to support a child,
like a parent plus loan, okay? Here are three legitimate
reasons to get credit in after a bankruptcy. Here’s how you’re impaired. It’s certainly not
the 10 year thing. So, if you want to get
FHA type of underwriting, you need to usually
have a 6-20 score-ish, you could do it with a 5-80,
but 6-20 is common. And you’re pretty much time
barred after a Chapter 7 bankruptcy. From being able to do that,
not just because of a score, but two years. That’s the end of
writing time frame. And when it comes to getting
what not or car lot, and getting pretty decent rate,
you’re looking at 12 months probably, after your Chapter
7 discharge, And then, for school allowance, it could be
as much as three years, for our federally backed laws. So, work that into your
timeframes, and, suddenly, bankruptcy, actually can
beat out consolidation, as far as how soon you’ll
have access to credit again. Depending on the circumstances
and can compete easily with settlements, because, in order
to settle you have to fall behind, significantly and/or
you need time to save up that 10 grand in this
hypothetical that I gave. So, let’s say it takes you 12
months to settle all your debt and another 12 to 24 for
your credit to bounce back. So, this Chapter 7 timeline for financing is very competitive
and nothing competes with it, like I mentioned,
as far as cost and savings and time because bankruptcy can
take 90 days, Chapter 7. So, rebuilding your credit
is sometimes contingent upon what you kept
open in a bankruptcy. So, somebody who
reconfirmed their mortgage, they’re obviously gonna
continue to pay that cuz they wanna keep the home. So, that’s a positive that stays
on your credit versus somebody who didn’t have that, you have
a little more building to do. If you already had a car loan
and you reconfirmed your car note, which you can do, in a
bankruptcy, and you continue to make monthly payments on that,
that’s helpful, right? But when you’re discharging
all of your debt, within a couple of months
you are going to, often, get pre-approved credit
offers in the mail. Capital One is a great
credit rebuilding creditor out there
that will take, as long as you didn’t discharge
their debt in Chapter 7, which you can still get a Capital One
card later but not immediately. There are other unsecured
creditors out there that will give you unsecured
credit card debt after a bankruptcy within
just a few months. So pick one. And obviously your rates
are going to be terrible. And the available credit limits
aren’t gonna be very high. But they’re there nonetheless,
and you take advantage of one and
maybe two tops. Okay. If you haven’t had a car loan, and by the way on those credit
cards you really just want to pay them off every month. Use them for a latte or
something but just don’t get in the habit of using
the cards for any expenses or bills or anything, because
it can become overwhelming. You want your credit utilization
on those cards, especially because they’re probably gonna
be smaller limits, to be under 30%, and preferably under 10%,
so just pay them off each month. And after six months of
consistently doing that you’ll look and see that your
credit can start to improve. Now, if you don’t
have a car loan, that is a great fixed loan, secured fixed loan to have to
help re-establish your credit. If you’re in a position
financially, to be able to do that as a rebuilding tool,
whether it’s in the first year. Usually I would recommend you
do that in the second year, because the rates are going to
be a little bit better a year after your bankruptcy,
that’s something to take on. Even a lease. Something that is a fixed loan. Furniture stores are okay but
that’s not necessarily something that is built in to
our everyday life. It’s a luxury. It’s something we might wanna do
if we need to replace furniture. Great, fine, do it. But if it’s not a necessity, don’t launch into something just
because it’s a credit rebuilder. Maybe one piece of furniture,
or something like that. You can also open secured cards. I’ve long, long been a fan of
Bank of America, for example. Because they have a secured
credit card program that obviously secured means
you have money on deposit. So, if you put $500, I like be
a baby because they have such a smaller amount
that you can do. You put $500 into an account
that is savings basically, it secures the $500
limit on the card. You use the card again for
one bag of groceries, pay it off every month. After you do that, often for six
months, you have the card open for six months, you can take the
$500 out, turn that secured card into and unsecured card and then
over time start to get credit limit increases, every six
months, every year sometimes. Now, I like Bank of America,
because that $500 is an amount that most of us can come up with
over a short period of time. To secure and open the account. Your local credit union might
have these kinds of programs. Your current bank might have
these kinds of programs. So, talk to them about that and see what deposit
rate is gonna be. I’ve seen some as
high as a thousand or twelve hundred dollars, and
if you have that to work with, fine, go for it. But try and look for smaller ones that you
can start out with. So, those are just some basic
ways that you can start to look to rebuild your credit
after a Chapter 7. And I wanted to include some of
that background as what you can qualify for and
how long it takes. Because that’s the kind of
window of time that you have to start to look to accomplish your
financial goals after a Chapter 7 take those basic rebuilding
tools and move forward. One other thing is
getting yourself added as an authorized user. Sometimes, that
means your parents. What if your mom or dad has
a long established account 15, 20 years credit card
American Express, Chase or something like that? And they add you as
an authorized user. You don’t even have
to have the card. They can just add you as an
authorized user it will show up on your credit report. And they can get the card
mailed to them or you can hand it to
them when you get it. And you never use it,
but you get the benefit of some of that depth of credit
history shown up on your credit. Because you probably
destroyed some of that depth of history when
you file bankruptcy and got your credit cards
included in the discharge. Now you don’t have
that history long amount of time within
an established account. But you can borrow it from
somebody who likes you. See you on the next video. [MUSIC]