Another way to re-establish credit after a bankruptcy is to apply for
high-interest, fee-heavy credit cards. These cards usually come with interest
rates between 21% and 28%. In addition, they also come with high annual fees,
set-up fees, and other charges. Often, these charges and fees can add up to
nearly the credit limit of the card.
While applying for these cards may seem pointless when you consider the
fees, there are advantages to these cards. Most of these cards will increase your
credit limit after a few months of on-time payments. In addition, once the
initial fees are paid down, only the annual fees and possibly a small monthly
fee of a few dollars remain as recurring charges. Also, some of these lenders
offer other types of loans, such as car loans and mortgages, that you can apply
for once you have proven your credit worthiness.
Buy Here, Pay Here
Another way to re-establish your credit can come from buying something that
most Americans can’t live without: a car. Of course, buying a car after a
bankruptcy is not going to be as easy as walking onto a car lot and signing the
papers. In fact, it is probably going to require visiting a car lot that does
its own financing—also known as buy here, pay here.
When most people think of a buy here, pay here lot, they often think of a
bunch of lemons sitting on a car lot with a dilapidated trailer as the business
office. While these places do exist, the idea of car lots that do their own
financing for people with bad credit has spread across the country.
Many of these new-age buy here, pay here lots actually look like franchised
car dealerships. They have newer models that are well-maintained, and not about
to fall apart as soon as you drive off the lot. Some of these dealers even have
service departments to keep the cars running after the sale. In addition, what
makes them wonderful for the person with a recent bankruptcy is the fact that,
just like any major lender, they report payment histories to the credit bureaus.
Of course, the interest rates at they types of dealerships will be higher.
However, after a couple of years of on-time payments being reported to the
credit bureaus, your chances of getting a lower interest car loan through a
major lender are greatly improved.