11-30-2012 06:23 PM
When I filed for bankruptcy in January of this year (discharged in March), I had a failed business and no income. After filing for bankruptcy I was able to restart my business and it has become hugely successful and stable. I currently make very good money and am living well below my means. I am now in the process of trying to rebuild my credit. I have a very small credit card from capitol one that I got approved for about three months ago that I have been using and paying off every month. The last I checked, my fico score is currntly 635 (As of this month).
I thought it would be a good idea to get another credit card, but I tried applying for a walmart credit card and an office max in store credit card but I got disaproved for both because of my bankruptcy. What about getting an autoloan? I do need another car, and have been getting auto loan offers, but I don't think I want to buy a new vehicle before I own a house.
I'm currently living well below my means while saving up money. I want to buy a house in a year or two. Is this possible to do with credit after a recent bankruptcy, or will I be forced to buy one with cash?
12-01-2012 07:56 AM
I have a somewhat similar story and current goals. I too am looking to get a mortgage. I was forced to file BK due to a failed business as well. I can't give you all the answers but here are a couple of things I know for sure and a couple of suggestions:
1. Current FHA loans requirements are 2 years from discharge date. I was discharged 6/6/11 so I will be eligible for an FHA loan 6/6/13. I have a good friend that is a mortgage broker and he says it is nearly impossible for anyone to do it that soon. My goal is to be that person that does it! However, in your case, you may be able to get a more traditional loan at a high interest rate if you have the funds for a significant down payment. Being self-employed makes it more difficult as they are now looking for a strong employment history, but if you wait 2 years and can show the previous 2 years W2's with significant steady income as well as having as very large down payment, you will have a shot as long as you have not had any late payments on ANYTHING since the BK.
2. My other suggestion is to use your business to build credit. Businesses use something called Dunn & Bradstreet to score credit much like TU/EQ/EX for personal credit. This will not help you buy a primary residence necessarily but help you down the line if you are interested in real estate or other types of investments. However, you could use the business to buy a vehicle and pay for the insurance, maintenance, etc or to pay for your medical insurance thus bringing your personal monthly expenses down which will absolutely help you qualify for a mortgage.
12-01-2012 08:32 AM
I'm a Realtor, and I have had quite a few buyers that have purchased two years after their BK discharge with an FHA loan. In fact, I had one of them close last week. I too had a BK and I am on the rebuilding path. (It takes a little longer if you had a house in the BK because your time period goes from the date that the house was deeded back to the bank and its 3 years from the deed transfer back to the bank.) If you didn't include a house in your BK, then it really is only two years since discharge. If you are diligent working on your credit you will be able to get an FHA loan.
I think your mortgage broker that said it was not common for someone to purchase two years after may have been dealing with consumers that were not aware of this site. Once you rebuild and have all of your documentation it really shouldn't be an issue at all.
12-01-2012 08:45 AM
No doubt! Thanks for the great info. He indeed said its uncommon for common people, but WE are not common people!
Currently: TU - 679, EX - 699, EQ - 684 7 months to go til mtg app!
12-01-2012 09:25 AM - edited 12-01-2012 09:27 AM
Thanks for the help! I have tried to separate my business' credit from mine. It's a corporation. I will also look into getting a d&b number.
I did have a foreclosure in 2010 that was related to the bankruptcy at the beginning of this year. My business limped along for about two years because of my debts and a few bits of bad luck. The moment I became free of my debts I was free to restart it and it was able to grow to where it is now within the space of a year.
I want to rebuild my credit. I think 635 (Experian) is a pretty good score to have considering it's only been about 8 months since discharge. I want to find ways to increase it as quickly as possible. Should I look into getting an autoloan? I don't have a w2, but I can show months of excellent income. I do need to get another car within a few months. My poor junker is on its last leg. I was just planning on getting another junker, but maybe I can get something a little better while also helping my credit score. What about leasing? Since I drive a lot of business miles my lawyer recommended I look into getting a lease. I have no idea what the chance of that is will a bankruptcy though.
12-01-2012 09:34 AM
I can tell you from my own experience that I was told I could probably get an auto loan but it would be around 19-24% APR.
Well I had almost no choice when my current vehicle was totaled in an accident and I NEEDED a vehicle for work. I received a 15k auto loan from wells fargo @10.5% - 4 months and 20 days from discharge date. My TU score at the time was 625 and I put 2k down.
I have 10/11 months (depending on bureau) of ontime payments along with only 1 other cc (1st Premier 750CL) and student loans and my current TU - 679. So in my case I believe it is helping significantly.
12-01-2012 09:57 AM
I didn't get an auto loan until the 2 yr anniversary of my BK discharge. The rate is 7.14% and my score at the time was about 705 IIRC. There was a large jump in my score when I hit the two year anniversary BTW.
So as far as using the installment loan to increase your score, I'm sure it is a factor due to the mix of credit. But I have found the utilization on your cc's to be the single most important factor. As to a lease, IMO it is not cost effective if you put on a lot of miles. Talk to your CPA, he can give you the in's and out's using your specific situation.
12-01-2012 03:07 PM
Thanks again for the info. I'll probably get a vehicle in January. It'll either be a junker or something better depending on if I can get credit or not.
Any ideas on how to get an auto loan? I already have 4 hard inquiries on my credit this year and will be looking at a few more while trying to get an auto loan. Wouldn't it be possible to talk to a lender and tell them what's on my credit report before they do a hard inquiry to try and "pre qualify" myself.
If I get a newer vehicle, I'll have the money in my account to "back it up" I'd be able to pay cash for it but I just want a loan to help with my credit. Is there any way I can use that to my advantage?
12-01-2012 06:42 PM
checkout hrguy's auto success in this thread....http://ficoforums.myfico.com/t5/Bankruptcy/Planning-For-Recovery/m-p/1716150#M10602
12-01-2012 10:22 PM
Thanks! I doubt I'll go to a dealer to get an auto unless it's brand new. I'll probably find one from an individual. How long after I get apporved do I have to actually find a vehicle?
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