Re: Planning For Recovery[ Edited ]
11-26-2012 10:23 PM - edited 11-26-2012 10:42 PM
Just giving my two cents as I am a recent dischargee myself (July 2012).
I see you are with USAA - but know that they are not BK friendly. Do your research on BK friendly creditors and banks to start off with first. My first rule out of d/c was, I was not banking with anyone who had a policy of not lending to BKers for a set amount of time. USAA tends to not be BK friendly as a lender for 3-5 years post discharge, not to mention most get them confused with a credit union, when they are indeed just a bank - a military bank.
Credit Unions are going to be your best friend post-bk. Forget about Amex for the next few years until that BK falls off - and sometimes not even then. They used to have the Oasis program that gave you a chance back in with them by repaying your old debt, but I heard that was abolished very recently.
Join a good credit union - their sole purpose is not to make money off of you - but to create a better contributing member of the organization by ensuring you get your credit back into good shape. Be upfront, and they will tell you their policies, as all credit unions are not good. I did the same as you - when I started consulting attorneys I closed current accounts and moved to a new credit union - not sure what I was going to do, and when I filed I didnt have any products with them so they were not in my BK, but after the fact I found out that their "internal policy" was not to lend to anyone who filed bankruptcy for at least three years - even if you miraculously got your scores up to 800 in that three year time frame - it would still result in a denial, which was understandable. What made me even more adamant about closing the account, which I did btw - was that even for a secured card that would be locked and backed by my deposit to help me rebuild would also fall under this guideline - I would not be allowed even a secured card.
Your result may vary with Cap One post BK - I havent tried since September and I was d/c just in July, but people say that they give you a second chance if you BK them. I tried, and I will tell you that my credit did not get pulled, the denial came back before they even got to that step and the denial was always the same (three times) "Previous delinquency with Capital One" which I respect, for the fact that they did not pull my three bureaus only to deny me as Cap One does for some reason - they like to pull all three bureaus to make decisions. Regardless, I see it as a blessing, because most times people that do get approved get into the credit steps program, that goes no higher than 750 for the credit line. As your BK ages, having that small line will cause new creditors to follow suit with smaller lines - then you will get pissed off, and want to close that line to prevent this cycle, which will only hurt you because you would be closing your oldest line.
I did my research and decided it was best for me not to risk all the inquiries to be denied or given small unsecured lines that will hurt my future - I went the Secured route. I did this with Navy Federal and Apple Federal Credit Unions, and with both of these lines, they will graduate to unsecured in 1 year after opening with satisfactory payment history for at least the initial deposit (I did 1000 each) if not more and they do not report as Secured Cards incase I decide to apply elsewhere which I did ( I will get to that in a little bit). Even if they do report as secured, it has the same positive effect on your Fico - and when they graduate the cards, you keep the same account numbers and history so it does not hurt your average age of accounts (a fico factor). I did this as follows, and this is called the 1-2 punch and is quite effective if you go this route to start;
I asked for a share secured loan with both Navy and Apple for 1000 each - they put 1000 on hold in my savings, and issued me a check for 1000 (so that is 2000 out of my pocket for now - ok fine). I took the 1000 that both of them gave me to open a Secured Visa for 1000, so now I have 4 positive tradelines of $4000 reporting with only tying up $2000 dollars. As I pay the secured loan monthly, it gets released back to my savings - so I pay 75 a month, of which 73 gets back to me right on the spot (2 dollars interest paid at most monthly) - so for $2 a month, I pay them the priveledge to increase my credit score until it is paid off....I took 12 month terms for the loans, so essentially at the end of the 12 months, I paid two loans satisfactorily, got my $2000 back in increments, and by time this all is done, my two secured cards are graduating - so then I get another $2000 back - this time next year, I will have 4 positive tradelines reported post BK, and I simply tied up my own money which btw grows interest and will be paid to you on completion.
Seeing this positive history already - I applied for a Barclay Rewards Visa, and they approved me - all they saw was my new positive credit post BK, they couldnt tell that it was Secured, and the analyst even said to me " I see your BK history and you are on the right track, do well with this new card we are going to give you - and you will get automatic increases"....the secured route paid off for me. And what did Barclay do? Since I was so fresh out, and demonstrated good history, they started me with the same $1000 credit line they saw on my reports just to test me....if I had got that Cap One for $300 or 500 unsecured, thats probably what they would have given me. Not to mention, depending on who you get these new unsecured cards with - they are known in the credit industry to other creditors, so sometimes just the name of certain creditors will cause denials in future credit on your reports (i.e First Premier, CreditOne, Applied Bank...etc). Secured Credit Union cards not so much, because credit unions are not classified as subprime lenders or consumer finance companies.
One or two credit cards? Two to three revolving lines (credit cards) maximize fico points, just one will help, but best is two to three. I did two for now, albeit they are secured, the two secured led to my one unsecured so now I have three.
Yes, it is best to wait until discharge for any clean-up credit repair - all other attempts will be in vain as if you apply for credit now before d/c nobody will touch you.
Utilization @ 27% is good, but below 10% gives you maximum Fico points. If you get three cards, keep the reported balance below 10% on just ONE card, not 10% combined across all three. You get max points when two of the three report a 0 balance - sometimes this isnt realistic to maintain - but you want it this way before you apply for any new cards or loans. It is said 5% is the best in fico scoring, but after 10% it slow decreases your points, and after 30% it tanks it - so stay under 10%, most experts here will concur that this is correct and I see it in my own fico scoring that I monitor. When I creep above 10% I start seeing a fast decline. With that said, 0% is even worse. You get no brownie points for having all credit cards reporting at 0. YOu have to show that you responsibly use credit, so I usually let a 5-10 dollar balance report to show utilization in my fico scoring.
Is an auto loan worth it? Yes and no. Installment loans (personal loans, auto loans, student loans) do little for Fico scoring on the credit side of things like getting new cards and loans, but it does help with future car purchases - lenders pull auto enhanced ficos that factor in past and present auto loan history - so with a good paid/paying auto loan - you may see a Fico of lets just say 670 - but when you go to a dealer he may pull 730, the difference could mean 730 qualified you for top tier leasing or 0% financing, but 670 would give you 5-7%, which would you rather pay? These are obtainable with BK history. Car loans will be the easiest to get approved for after discharge, your interest rate will not be pretty - that is where your credit union will come into play. Cars are in essense secured loans like secured credit cards...you may find a creditor who will NOT give you a credit card but that same creditor WILL give you an auto loan because the car secures it. Credit unions are your friends here too. Cap One may give you 21% out of discharge, a credit union will give you 10% with the same score.....3 months post BK - I was freaking out as my car loan that I was paying on thru bankruptcy was falling apart that I did not reaffirm. I searched high and low...Roadloans approved me @ 24%....I decided I would walk before I took that. Took a chance with my credit union, Apple who previously said no to a unsecured credit card, and they said "sure you can, 10.74% for any auto any amount" which btw 10.74 is high for the normal person, but EXTREMELY good for a person 3 months post discharge, I was happy! This was based on a 600 TU Fico score, the same one here offered on Myfico. I was reasonable and said, ok with that high of a rate, let me be practical after driving Infinitis, high-end Honda Accords and go to Toyota and just get a used Corolla for 10-15k, I'll buy new in a few years. The salesman was so nice, he kept persisting to "just let me see what I can do for you, let me pull and submit to Toyota", we had already had a deal set-up for a used 2010 corolla at 12k that would have been 340 a month with the 10.74% from the credit union with 2000 down. I finally gave in, and let him see - I already had my approval if they said no - what was one more inquiry?
Toyota Financial pulled my auto enhanced Fico from Transunion - and as I said, my normal Transunion fico on here was just 600. My auto-enhanced came back at 650, a 50 point difference. That put me into Tier 3, which RIGHT NOW until January 2013 qualifies for Tier 1 rates - you can lease or get 0% financing on brand new Toyotas for 60 months or finance certified used at 1.9%. BTW...I have no history with Toyota, in-fact when my fico was 730 before BK they had denied me. I had no lates or derogatory credit history. They approved me to lease a BRAND NEW 2013 Toyota Corolla S fully loaded, gave me $1500 customer cash and my lease payment is 236.00 a month, no cash out of my own pocket for 36 months. Not even in half an hour's time this was all done, it took them even longer to find me the color I wanted than it took for them to get the approval. I have never been really fond of their designs, I've always like Nissan and Honda - but guess what, they earned my business from now on by giving me a chance so soon after discharge. And best thing about them - even if my credit never improves or I mess up again down the road, if I pay them on-time every month, they will finance me for life at top tier rate - they own Lexus, so when my lease is up - I can go to Lexus and get whatever I want and can afford - no questions asked even if my fico is 400 and nobody else will finance me. They even called and offered me the Toyota Rewards Visa card to earn points towards my next purchase when the lease is up - oh and that 236.00 payment? That was originally 255.00 when we signed the deal, Toyota called two weeks later and had made an oversight, and placed me one tier higher which brought the payment down to 236.00...can you imagine? With a three month old bankruptcy, and all of my bankrupcty accounts reporting...
All of this, because I started with two secured cards, less than three months old at the time, I signed for my new lease on 10/31/2012 - just three months over my discharge date. So it is all possible, if I had not joined my two credit unions that would even ALLOW me to get secured credit, this may not have happened.
Moral of the story, reasearch BK friendly credit unions and creditors - and stay away from just any unsecured card as your future credit will depend on it - as you can see, going the secured route got me back in with prime financial institutions not even 4 months post discharge.
Sorry to be so detailed, but I'm happy to pass on the info that was passed on to me just not that long ago from members here and other forums. You're on the right track as I was, reading and asking questions while pending discharge - that way you can come out of the discharge gate running.
POST BK APPROVALS:
NFCU nRewards Secured Visa: $1000 7/12| Apple FCU Secured Visa: $1000 9/12
Toyota Finance Lease: 0% | 0.0008 MF 10/12
Barclay Apple Finance Visa: $2200 1/13
NFCU cashRewards Visa: $2500 3/13