There are four major elements of a general underwriter’s guidelines in reviewing and analyzing a credit application for the lender. We like to call it the Four C’s: credit, capacity, collateral, and character.
The Four C’s:
Credit – The applications you submit immediately after bankruptcy, at the beginning of your quest to restore your credit are going to have a low credit score. You have a “bankruptcy” notation on your credit report now. It’s a difficult first hurdle when applying for post-bankruptcy credit. This makes it important to cultivate a persistent attitude when finding out eligibility requirements for credit accounts – preferably before you even apply.
Capacity – This is the phase during which your current income and cash flow are considered. Remember that you just filed for bankruptcy. You eliminated a large amount of your monthly “expenses” or payments (you may have kept a mortgage or car loan). You might have just started a new job or maybe you have been at your job for years. In most scenarios, a bankruptcy petitioner does not file bankruptcy a second time. Hopefully, the lender will decide that you have learned your lesson and are starting out again with a new sense of conservative, slow credit growth.
Collateral – This refers to assets such as cars, real estate, or retirement accounts that survived your bankruptcy. Lenders like to see assets survive a bankruptcy because they can serve as security for future loans. For instance, title loans come with high interest rates and extra fees, but they also give the credit assurance of loan repayment. Some will choose this route when trying to obtain credit post-bankruptcy, putting up a paid-in-full vehicle as security on a loan. I never suggest this route because it’s too dangerous and the terms are almost always risky, but it is one of the more accessible methods of obtaining post-bankruptcy credit.
Character – You filed bankruptcy and some (a vast MINORITY in today’s culture) will still view this as a negative character trait. But your story doesn’t begin or end there. You may also have a good, long work history. Maybe you have lived in the same home for decades. Maybe you are married with children. Maybe you have a college education. These are just a few of the factors that creditors may view as positive signs that you will not only recover from bankruptcy, but that you will recover quickly.
If you have more questions about how to rebuild your credit after bankruptcy, come back soon. Additional helpful information for bankruptcy petitioners and filers who are now looking to improve their credit score will be posted soon here at Westgate Law. If you have questions that can’t wait, please get in touch with an experienced southern California bankruptcy lawyer by contacting Westgate Law today.