How to Get a Personal Loan 2 Years After a Discharged Chapter 7 Bankruptcy

A past bankruptcy will not haunt you forever.

If you've ever filed for a Chapter 7 bankruptcy, you may be hesitant to apply for a personal loan. Fortunately, if your credit report reflects good debt management skills after the bankruptcy discharge, your past mistakes will not haunt you forever. Certain actions you take, such as applying with a co-signer, asking for a secured loan, or applying with your own bank can greatly increase the odds of your loan application being approved.

Instructions

1. Check your credit score. Bankruptcy is very damaging to your credit score, but the older the bankruptcy is, the less it will affect you. Lenders focus on your most recent two years of credit history when deciding if you are a loan risk. If you have made timely payments and been responsible with your debts during this time frame, your credit report will reflect that.

2. Dispute any inaccuracies that you find on your credit report. According to the Fair Credit Reporting Act, you have the right to request that the credit bureaus investigate any entries on your credit report that you do not recognize. If these entries cannot be proven accurate by the companies providing the information to the credit bureaus, they must be removed.

3. Postpone applying for any new debt. Each time you apply for debt, the creditor will review your credit report. When this occurs, your credit report reflects an "inquiry." Not only does an inquiry temporarily drop your credit score, but recent inquiries make it appear that you are shopping for debt, which makes you a greater risk for lenders.

4. Seek out a co-signer. If you feel your credit score is not high enough to qualify for a loan or you have not been very responsible with your debts since your bankruptcy was discharged, you may be turned down for a personal loan. Having a friend or family member with good credit who is willing to co-sign with you will make writing the loan less of a risk to the lender and substantially increase your chances of the loan application being approved.

5. Offer collateral. You can opt to pledge your home or car as collateral for the security of the loan. If you default, your lender will claim the collateral to cover the balance of the loan. Pledging collateral in lieu of nonpayment makes the loan more appealing to a lender since the loan balance must be paid either voluntarily or involuntarily. This is known as a secured loan. Secured loans usually carry lower interest rates than the unsecured variety.

6. Apply with your personal bank. Your own bank is more likely to be willing to work around past credit and bankruptcy issues to grant you a loan than another institution will. For most banks, their customers are a higher priority than the customers of their competitors.

References

• Why Bankruptcy and Foreclosure Affect Your Credit Score Less Than You Think
• Fair Credit Reporting Act (section 1681i)
• Ask John: Inquiries 101