The effects of bankruptcy on your ability to secure credit are difficult to assess. Credit is extended by a wide variety of individual lenders and is not generally regulated. The criteria used by private lenders to extend credit vary from one lender to the next and typically are not disclosed to the public. Many creditors are willing to extend credit to recent bankruptcy filers, though the terms are not as favorable as they would be in the absence of an adverse credit history. There are two factors which are obviously important to creditors in determining whether to extend credit:
Your past experience with credit is viewed (quite reasonably) as an indication of how you will handle credit in the future. A bankruptcy filing is an adverse event in this respect. As mentioned at the outset, the debt problems that led to your bankruptcy already adversely impacted your credit history, and a bankruptcy filing doesn’t make it that much worse. Depending you’re your circumstances, your credit history may also reflect positives in your credit before the circumstances which caused the bankruptcy. If you had a positive credit history before the events that pushed you into bankruptcy, you may find that it is easier to re-establish credit than if you were perpetually behind on your payments and had judgments against you.
Ability to make payments
This is the most important consideration for bankruptcy filers. Future lenders will want to be sure that you have the ability to pay back a loan before extending you credit. Your bankruptcy discharge should improve your ability to make payments in the future. You will no longer owe the debt that you did when you filed, and you will no longer be subject to judgments, garnishment and other collection activities which would impair your ability to pay back the new loan. In addition, the restrictions against multiple bankruptcy filings may give the creditor some assurance of their ability to collect on post-petition debts. The main thing after bankruptcy is to budget carefully, maintain a reserve, and make payments on or ahead of schedule.
There is no magic credit repair – but with discipline over time you will be able to secure appropriate credit for your needs.