The bankruptcy blog

No one wants to declare bankruptcy. There’s a good deal of stigma attached to it. It’s stressful, and even more so when people make you feel like filing bankruptcy is some kind of failure. While it’s true that some people find their way into bankruptcy because of bad choices and poor spending habits, there are many more who have to file through no fault of their own. In fact, the most common reason people declare bankruptcy is because of an illness or accident that leaves them with staggering medical bills they will never be able to pay. Health insurance is great, but it doesn’t always cover everything, and the costs of medical care continue to spiral out of control. Now imagine how you’ll feel if you file for bankruptcy and then discover you need to replace your car as well. More stress! But this is when you need to find out about the 10 Bankruptcy Car Loan Benefits.

General Bankruptcy Car Loan Benefits

There are several bankruptcy car loan benefits that can be gained from any provider who serves up loans to people with challenged credit, including the following:

Improve Your Credit Score. When you realize filing for bankruptcy is the only way you’ll be able to get your debts under control, your credit score will probably be as low as it’s ever been. And then you find out that the bankruptcy will be on your credit reports for at least 7-10 years for other lenders to see. How will you ever get a new line of credit if you need one? But the moment you file is when you have the opportunity to start rebuilding your credit history and moving your credit score up instead of down. There are lenders who recognize that filing bankruptcy is a positive thing. It will either result in your worst debts being totally eliminated (Chapter 7 bankruptcy) or create a reasonable repayment plan that will get you back on your feet (Chapter 13 bankruptcy). Financing the purchase of used car with one of these lenders offers you the opportunity to show the credit bureaus how you can make on-time payments on a new line of credit. This is how you get your credit score moving in the right direction!

Get Out of a Bad Loan. Lots of people in a bankruptcy situation feel trapped by an “underwater” or “upside-down” car loan, meaning they owe more on the vehicle than it’s worth. One of the best potential bankruptcy car loan benefits is the opportunity to get out of the underwater loan and get into a great used car you can actually afford.

Upgrade Your Ride. Other people who have filed for bankruptcy or had one recently discharged are struggling to keep their older car with lots of miles on the road because it keeps needing more repairs, which add up to be quite expensive over time. You may be able to use a bankruptcy car loan to drive a better car with fewer miles on it in good enough shape that it will actually cost you less in the long run!

Better Loan Rates. You might think that being in a bankruptcy situation automatically means you’ll have to settle for the highest interest rates out there on a used car loan. Not necessarily! People who have a horrible credit score who haven’t declared bankruptcy often get the worst rates of all. Why? Because as previously mentioned, the lenders who specialize in serving bankruptcy customers realize that declaring bankruptcy is a sign you’re taking action to improve your situation. When some of your worst debts are wiped away or part of a reasonable repayment plan, your debt-to-income ratio goes down, and bankruptcy lenders may reward you for that with better rates than people with bad credit who haven’t filed. Their debt-to-income ratio is higher and they have no prospects of improvement.

Why Day One Credit

There are eight more bankruptcy car loan benefits you can gain if you choose to work with Day One Credit to find financing, including the following:

Deep Experience. Day One Credit was founded by the same people who started the Auto City used car dealership in El Cajon more than a decade. Working with bankruptcy customers to find the financing they need has been a part of the core mission of this team from the very beginning.

Robust Network of Lenders. We’ve spent years putting together the most incredible network of lenders you can imagine. The lenders we work with have special programs to serve bankruptcy customers of all kinds.  When we get all these lenders competing for your business at the same time, you end up with the rates and terms that fit your credit situation.

Affordability. We help many of our customers find bankruptcy car loans that don’t require any down payment at all. Of course, if you’re able to make a down payment, you definitely should. But if you can’t make a down payment, that doesn’t have to keep you from getting the loan and car you need. We’ll also help you make sure you end up with a car and loan you can afford. It doesn’t do any good if you stretch yourself too far and end up delinquent on your payments.

Trusted. The good work we have done on behalf of our bankruptcy customers has not gone unnoticed. Needless to say, our customers are super-appreciative of the results we get for them, as well as our excellence in customer service. We treat each and every customer like a VIP!

Know-How. Because we’ve been doing this work for so long, we know all the common questions people tend to ask, and we are always ready to give the answers that help our customers navigate the bankruptcy car loan process. Our goal is always to educate our customers so they feel confident they are making an informed decision.

Getting a Great Car. We work with a wide selection of late model used cars with low miles to choose from.

Many people view filing for bankruptcy as some kind of ending, but you’ll be much better off if you view it like a new beginning. Bankruptcy laws were designed to give you a fresh start. You owe it to yourself to make the most of this fresh start. And one way to do that is to start rebuilding your credit. Instead of thinking of bankruptcy as something that’s holding you back, think of it as the launching pad into a brighter financial future, because that’s exactly what it is. Now that you know about all 10 bankruptcy car loan benefits, what are you waiting for? The loan and car you need may be just a few clicks away. Get started today!

Filing for bankruptcy can be a confusing process for first-timers, which is why we always recommend working with a qualified bankruptcy attorney if you want get a fresh start and regain control of your financial life.One thing people often don’t understand about bankruptcy is what reaffirmation means. In this article we’ll explain what you need to know about reaffirmation, as well as how reaffirmation affects bankruptcy car loans when you need to replace your car with an open bankruptcy case.

What is Reaffirmation During a Bankruptcy?

When you file for either a Chapter 7 or Chapter 13 bankruptcy, one of the things you have to do is decide which debts are going to be included in the bankruptcy filing and which ones will not be included. Typically, you’ll be including most or all of your unsecured debts (credit cards, personal loans, etc.). But there are some things you own and are making payments on that you need to keep – like your car. If you want to keep your vehicle in bankruptcy, one way to do it is to enter into a reaffirmation agreement with the lender. The reaffirmation agreement means you’re committed to keeping up your payments on your car loan and will not include that debt in the bankruptcy. After all, you still need a vehicle to get around, right? You should only enter into reaffirmation agreements on debts that are for things you really need to keep – and make sure you can afford to keep up the payments and make those payments on time. Also keep in mind that when you sign a reaffirmation on a car loan, the lender may not report your loan payments to the credit bureaus while the agreement is in place, which means those payments aren’t helping to improve your credit score.

Check to See if Your Car is Exempt from Bankruptcy

Depending on how much real equity you have in your car, it might fall into the exempt property category in California. If your car is exempt, then you get to keep it during bankruptcy without going through the reaffirmation process. In California, you get to choose between two different exemption schemes. Your bankruptcy attorney can help you figure out which one is best for you depending on all the different kinds of property you own. But when it comes to your car, here’s what the two different schemes consider exempt: In System 1 (704) up to $3,050 in car equity is exempt and in System 2 (703) up to $5,350 in car equity is exempt. These figures are updated every three years. Since these are the figures from 2016, new figures will be in April of 2019 to account for changes in the cost of living.

Your equity in the car is the difference between what you owe on the loan and what the car is worth. If you owe more on the loan than the car is worth (meaning you’re “upside down” or “underwater” on the loan), then you have no equity in the car and it cannot be exempted from the bankruptcy. If you want to keep that car, you’d want to enter into a reaffirmation agreement on that debt. But, if you have a car that’s worth $10,000 and you only owe $7,000 on it, then you have $3,000 of real equity in the vehicle, which falls under the threshold of both exemption systems. This means your ownership of the vehicle is protected from creditors during bankruptcy as long as you keep making your payments on time.

Note that if you choose System 2 (703), there is an additional “wildcard” exemption of $1,425 that can be applied to any property you want. Let’s say you have that same car mentioned before that’s worth $10,000 but now you owe only $3,500 on the loan. You have equity of $6,500 in the car, but the vehicle exemption is only protecting $5,350 of that equity. What about the other $1,150 of equity you want to protect? If you want to have it all exempted, you could take $1,150 of your wildcard exemption and apply it to the vehicle so all of your equity is protected from the bankruptcy.

Does Reaffirmation Affect Bankruptcy Car Loans?

It’s important to make sure you understand one aspect of reaffirmation that a lot of people get wrong. Many people think that if they sign a reaffirmation on their car loan, they are somehow “locked-in” on that loan and have to ride it out to the bitter end. Not true! You are totally free to sell that car and get another vehicle if that’s what you need to do, but you need to be careful.

What you need to pay special attention to is whether you have positive or negative equity in the vehicle. If you’ve signed a reaffirmation agreement, some lenders require you to first cover all or at least half of the balance before they will offer you a new loan, and even then the terms may not be very good. If you have positive equity in the car, you should have no problem getting the bankruptcy loan you need, as long as you meet the other eligibility requirements. You can use the positive equity as a down payment towards your next loan. You can also cancel a reaffirmation agreement and then apply for a bankruptcy car loan through a fresh start lending program. The window for canceling a reaffirmation agreement is either before your bankruptcy is discharged or within 60 days of when the reaffirmation agreement was filed with the court (whichever date is later). If you’re past both those dates and want to cancel a reaffirmation agreement, enlist the help of an attorney.

For example, let’s say you signed a reaffirmation agreement on your car loan. By doing so, you committed to keep making your payments on the car loan. But what if you realize keeping up the payments is going to be harder than you thought? Or what if your family is growing and you need a bigger vehicle? Having positive equity in your current vehicle is the best way to ensure you can get a new loan to buy your next car, but even then there is no guarantee. You’ve been making your loan payments and thinking your credit is improving, but if the lender has not been reporting those payments to the credit bureaus, your credit score might be worse than it was before the bankruptcy! And, as mentioned earlier, if you have negative equity in the car, a lender could require you to cover 50% to 100% of the balance of the loan before they will consider giving you a new loan with better terms.

As you can see, this aspect of bankruptcy that’s about property exemptions and reaffirmation agreements can become complex if you have a lot of different kinds of property. You have to figure out which of the two different California exemption schemes is the right one for you, and then also determine if you should do a reaffirmation on your current car loan. This is why Day One recommends you work with experienced bankruptcy attorneys. And if you need to replace your current vehicle after filing bankruptcy, keep Day One in mind for bankruptcy car loans. Our process is fast and gets results for you. Contact us for more information or start our online application now!

When you realize that the mountain of debt you’re facing for whatever reason is way more than you’ll ever be able to handle, filing for bankruptcy offers you a way out. In a Chapter 13 bankruptcy, you’ll work with an attorney and the bankruptcy court to come up with a reasonable payment plan that will get your debts back under control – something that can take anywhere from 3-5 years to achieve. In a Chapter 7 bankruptcy, all your worst debts are completely eliminated, leaving you with only those you need to maintain (such as your house, car, and student loans). The decision to file and the process of filing for bankruptcy causes a lot of stress for most people going through it. If they discover they need to replace their car, the added stress causes many people to make one or more of the 10 bankruptcy car buying mistakes. This article explains each one, and how you can avoid all of them.

1. Paying Cash for a Car

People with fantastic credit who can pay for a car in cash should always feel free to do so and avoid all the interest payments of a financed purchase. But if you are in a bankruptcy situation, we think paying cash for a car is one of the worst bankruptcy car buying mistakes you can make. Why? Because one of your primary goals in filing bankruptcy is to start rebuilding your credit history and increase your credit score.

What the credit bureaus are looking for is how you how handle new lines of credit. If you pay cash for a car, nothing gets reported to the credit bureaus, which means you won’t gain any credit-improving benefits! One way to start restoring your credit is by financing the purchase of a vehicle and making on-time payments, each of which will be reported to the credit bureaus.

Although the costs of the loan mean you’ll end up paying more than you would with cash, it can be worth it in order to improve your credit score. You’ll end up having more credit options available to you for other kinds of loans like a mortgage to buy a house, a home equity loan to make improvements to your house, and qualify for better credit cards. Can you afford to miss out on all those benefits? Day One Credit has a strong network of lenders who specialize in serving bankruptcy customers, whether it’s a Chapter 7, a Chapter 13, or a recently discharged bankruptcy.

2. Buying from an Unreputable BHPH Dealer

What is a BHPH dealer? It’s an acronym standing for “Buy-Here-Pay-Here car.” This kind of car dealership offers what some people call “in-house financing.” It means the dealer is not only selling you the car, it is also loaning you the money to make the purchase. This can turn out to be one of the most serious bankruptcy car buying mistakes! If you’re not sure whether or not a dealer is a BHPH, one sign is that they almost always guarantee approval

The problem is that the terms of the loan might be really horrible. We’ve heard that some BHPH dealers are notorious for taking advantage of credit-challenged people by charging grossly high interest rates. Then, to add insult to injury, they often hide all kinds of fees and other inconvenient terms in the fine print of the finance contract. For example, the contract might specify that you have to make weekly payments instead of monthly payments, and if you’re late on just one payment they will repossess the car! No one should settle for those kinds of shady practices.

At Day One Credit, we don’t make loans, we find loans. We send your application out to all the lenders in our network who have special programs for bankruptcy customers. These lenders are competing for your business, which means you’ll end up with the loan that fits your particular credit situation.

3. Purchasing an Older Car with High Miles

When bankruptcy filers assume there’s no way they could ever get approved for a car loan, they often end up trying to spend as little as possible on a car they can buy for whatever little cash they have. What they end up being able to afford without financing is often an older car with a whole lot of miles on it that’s not in the best of shape. But here’s the thing: When you settle for an older vehicle with high miles, you often end up paying a lot more in repairs than you thought you would. If you add all those repair costs to what you’ve already paid for the car, you might realize you would have been better off paying a higher price on a newer used vehicle with fewer miles that doesn’t need to constantly be in the repair shop.

Other kinds of cars you should avoid at all costs are those with salvage titles and those that are clearly lemons. Cars with prices that seem too good to be true are probably exactly that. If you shop the bottom of the barrel, you inevitably get what you pay for, and then some in the form of hidden frame damage, flood damage or all kinds of other safety issues that will cost you way more than you bargained for. Financing a better used car will save you money in the long run, as well as help your rebuilt your credit.

4. Getting a Brand-New Vehicle Instead of Used Vehicle

When you’re in an open or recently discharged bankruptcy situation, you need to make smart choices in order to make the most of the fresh start bankruptcy provides. The smart choice here is to get the most bang for your buck as possible, which makes buying new one of the most common bankruptcy car buying mistakes people make. Why is purchasing a brand-new vehicle a bad idea? The reason is because of the depreciation factor. In the first several years your new car loses 15-25% of its value each year, which means you’ll be “underwater” or “upside-down” on the loan for years. But if you buy a high-quality used vehicle, the previous owner has already taken the big hit on depreciation, which means you get a great car for a lot less money!

5. Choosing an Unaffordable Vehicle such as a Luxury Car

This one is a variation on making responsible choices as a bankruptcy car buyer. Can you really afford a luxury car? Would it be a stretch to afford it? What will you do if something changes and your income goes down? At Day One Credit, we help people be realistic about what they can afford. After all, the last thing you want to happen when you’re trying to rebuild your credit is bite off more than you can chew and end up being delinquent on your car payments. What many people don’t realize is that there are more costs to owning a luxury car than just the price tag and monthly payment. Luxury cars cost a lot more to insure, and they’re also going to cost more to maintain and repair when something goes wrong.

6. Failing to get GAP Insurance and Service Contracts

What is GAP insurance? This is an acronym that stands for Guaranteed Asset Protection. It’s a type of insurance that covers any “gap” between the balance of a loan due on a vehicle and what an insurance company pays in the event of a total loss. In case you didn’t know, those two figures rarely match up. The insurance company often pays less for the car than what you still owe on it. No one likes being stuck with payments on a car that no longer exists, and GAP insurance is what protects you from that scenario. Service contracts are another kind of insurance that help pay for maintenance and repairs when needed. Please note that service contracts vary widely in terms of what is covered, for how long, and with what kind of deductible you have to pay. Read the fine print before signing on the dotted line!

7. Replacing a Great Car

You would be surprised how many people in a bankruptcy situation make the mistake of getting a different car when they don’t even need one to being with. Yes, you want to rebuild your credit, and financing a car purchase is one way to do that, but it should never be your only reason to do it, and especially if you already have a great car. Here’s what Day One Credit offers as a rule of thumb in this situation: If your current car is less than five years old, has relatively low mileage, and is paid off or close to being paid off, you should definitely stick with it! There are other ways to start rebuilding your credit, such as getting a secured credit card.

8. Buying a Car for Someone Else

Whether it’s your child, another family member, or a friend, buying a car for someone else may be a very generous thing to do, but often ends up being one of the worst bankruptcy car buying mistakes you can make. Remember, your top priority with a bankruptcy is to get your credit back into good shape. But when you buy a car for someone else, can you guess who is on the hook if something goes wrong? The answer is YOU! When you’re trying to restore your credit, the last thing you should do is become the one who is ultimately financially responsible for someone else’s vehicle no matter how responsible you think they are.

9. Having a Cosigner Who did Not Also File for Bankruptcy

You have to be very careful to understand the situation you have with your current car and its outstanding loan if you decide to declare bankruptcy but had a cosigner on the loan. If you declare bankruptcy but your cosigner doesn’t, the lender can (and probably will) go after your cosigner to collect on the remaining debt. This can cause a great deal of pain and heartache between two people, so be sure you know the details of your current situation. Day One Credit is always happy to help you understand all your options – just contact us!

10. Lacking a Valid License

Most lenders are going to require that your driver’s license be valid, up-to-date, and not suspended. You should not try to get a car at all if you lack a valid driver’s license because it could land you in some serious trouble. Don’t do it!

If you’re in a bankruptcy situation and you need a car, you won’t find a better option in the greater San Diego area than Day One Credit. Read our Why Day One page and see for yourself!

Every time a lender makes a loan to a borrower, they’re taking a big risk. How can a lender know if the borrower will make on-time payments? How will the lender know the borrower won’t default on the loan? They honestly don’t know, which is why lending is a risk. But through experience, lenders have discovered ways to help them predict the chances of default.

What the lenders do is look at particular data and characteristics related to a borrower to assess the level of risk in making a loan to that borrower. As lenders refine this risk-assessment process, they often also create loan guidelines borrowers can use to see if they’re even eligible. This helps save time by preventing people from applying for a loan who would most likely be rejected anyways. For that to work, however, consumers need to understand the financial terms used in loan guidelines. This article will help you understand the common financial terms you’ll find in bankruptcy auto loan guidelines so you can decide whether or not this type of a loan is right for you.

How Credit Reports and Credit Scores Affect Loan Guidelines

Some lenders have a very clear guideline for a minimum credit score potential borrowers have to meet in order to be eligible to apply for a loan. It’s going to vary widely from lender to lender depending on the level of risk they are willing to take on in making a loan. The higher the credit score requirement, the less risk they are willing to expose themselves to, making it harder or impossible for folks with challenged credit to get a loan through that lender.

At Day One Credit, we don’t have a minimum credit score requirement. In fact, you might qualify even if you have no credit history at all! Because we specialize in finding bankruptcy car loans, we know your credit score is already not good. But because you’re in bankruptcy or recently had one discharged, we also know you’re on the pathway to restoring your credit and doing better. The lenders we work with are the ones who also look past a credit score to serve this group of customers and help them make the most of the fresh start bankruptcy provides.

Payment to Income and Debt to Income ratios: PTI and DTI

Many lenders want to take a close look not just at your income, but how much of your monthly gross income (before taxes are taken out) is going to go towards the loan payment. This is a way of making sure you don’t end up with a loan payment you really can’t afford. Lenders refer to this ratio as PTI – your payment to income ratio. But they don’t just take into account the monthly car loan payment. They’re also going to add in your monthly car insurance payment because you need to be able to afford both.

You can figure out your own PTI ratio by taking what you think you can afford in terms of a car loan payment plus an estimate of the monthly car insurance payment, add them together, and then divide that total by your monthly gross income and express the result as a percentage. A lot of lenders who work with people who have challenged credit generally want your PTI ratio to be in the 15-20% range. As an example, let’s say you’re interested in buying a used car but you need to finance it. You have an idea of what you want and think a reasonable monthly car loan payment for you would be $250/month and insurance of about $90/month for a grand total monthly car-related payment of $340. Now let’s say your gross monthly income is $2,400. You take the payment of $340 and divide it by your income of $2,400 and get .14 (rounding down), then move the decimal point over two places to the right and get 14%. This would be an acceptable PTI ration for many lenders. That is, unless you have a lot of other debt payments to make. This is why most lenders will also look at your DTI ratio – your debt-to-income ratio.

Your DTI gives lenders a picture of how much of your gross monthly income has to go to all your debt and bill payments combined together. If most of your monthly income is eaten up with your bills, lenders will question how you can add another significant bill in the form of a car loan payment and insurance. Calculating your DTI is similar to calculating your PTI. The difference is that in the case of DTI what you’re adding together are all your regular monthly bills and debt payments for housing, utilities, and so on. Many lenders get very nervous about making a loan to you if your DTI is more than 50%.

Here at Day One Credit, the advantage you have is the fact that you’ve either declared bankruptcy or have recently had your bankruptcy discharged. This is when your debt-to-income ratio is going to be much better than it was before you declared bankruptcy, and the lenders we work with understand how much this matters.

Day One Credit Bankruptcy Financing Guidelines

At Day One Credit, we take great pride in helping people who have declared bankruptcy get the car they need by finding bankruptcy car loans for them. The lenders we work with specialize in this type of lending, and we get them all competing with each other to get your business. This helps you find the loan that best fits your credit situation. We find we can help most people in a bankruptcy situation, but not everyone. We do have our own eligibility guidelines to help you determine whether or not you should apply. Please note, however, that meeting our eligibility guidelines does not guarantee you’ll get a loan. We still have to evaluate your application to make sure we can work with you. If you meet the guidelines below, you should feel free to apply:

Income: We need documented proof of minimum gross monthly income of at least $2,200 per month. You can prove your income with W-2 forms from your employer or with 1099 forms or bank statements if you are self-employed.

Bankruptcy Status: Because we work exclusively with bankruptcy customers, you need to have either already filed for bankruptcy or have had your bankruptcy recently discharged.

Valid Driver’s License: Unfortunately, if your driver’s license is expired or suspended, we cannot help you.

Those are our three most basic eligibility guidelines. But we also find there other cases where we think a bankruptcy car loan is not a good choice for you, including the following:

You Already Have a Great Car: If your current vehicle is still on the new side with low miles, is paid off or close to being paid off, you should just stick with it.

Income is Not Stable: In order for a bankruptcy car loan to work in your favor, your income needs to be stable. If you know your income is about to drop or you’re going to experience a sudden increase in expenses, it would be better not to apply.

Cosigner Bankruptcy Status: Sometimes our bankruptcy customers want to use a cosigner to boost their chances of getting a loan. But if your cosigner didn’t also file for bankruptcy and things go badly with payments, the lender can go after the cosigner.

Our commitment to you at Day One Credit is to help you understand the details of your own credit situation and give you a realistic picture of what’s possible. We aren’t going to let you take on a loan payment you can’t afford because that is simply not helpful.

The other piece of good news about working with Day One Credit to find a bankruptcy car loan is it’s one way to start rebuilding your credit after bankruptcy. This pathway to restoring your credit means finding a new loan and making on-time payments. Some lenders won’t give you the time of day with a bankruptcy on your credit history, but it’s our whole mission to work with bankruptcy customers!

There are lending programs in our network that don’t require any down payment, and we will also help you find an affordable used car that’s right for you. If you meet our basic bankruptcy car loan guidelines, you can start the process online at our website when you fill out our easy online application. If we need to clarify any of the information on your application, we’ll contact you. And then you’ll hear back from us in a matter of minutes! But if you have more questions about how all this works, please feel free to contact us – we’ll be happy to talk you and help you understand everything you need to know!

Having a bad credit score can keep you from getting the loan or credit card you need. If your credit report is long and complex with lots of past issues, you’d be surprised how many of them probably shouldn’t even be on there anymore. Things don’t get fixed automatically on your credit report even though they should. Cleaning up your credit history can go a long way towards improving your credit score and getting back on track to where you want to be financially. But when you sit down and look at your credit report, it’s hard to know where to begin and what to do about it. For this reason, many people wonder whether or not credit repair services work. This article will give you some advice about whether or not to work with a credit repair company.

Credit Repair Services are Not Free

The most important thing to realize about credit repair services is that they come with a cost. There are many companies out there who claim they can help you improve your credit score by finding and fixing things on your credit report. And they’re going to charge fees to do it. How much you’ll be charged and how long it will take varies from company to company, but here’s how CreditKarma describes it:

“Depending on the company, you might pay a one-time flat fee, or pay for each derogatory mark the company removes from each of your reports. This may start around $35 per deletion and could range to $750 or more. The company may also charge by the month, ranging from $50 to $130 or more. You might also pay setup fees or a fee for accessing your credit reports.”

Please understand that anything a legitimate credit repair service does you can do yourself and it won’t cost you a dime. The caveat, of course, is that it does cost you time, and quite a bit of it, to do it on your own. So a big part of your decision about whether or not to use a credit repair service has to do with whether or not you can afford to pay for it or are willing to roll up your sleeves and do it yourself.

What Should be Your Credit Score Goal?

The simplest answer to this question is better than what it is now, right? But it helps to know how lenders view different levels of credit scores. The most commonly used credit score that lenders and creditors look at is FICO. Your FICO credit score can generally range from 300-850. It is usually interpreted as follows:

Less than 580 = Poor

580 to 669 = Fair

670 to 739 = Good

740 to 799 = Very Good

800 and above = Exceptional

Each and every error you find and fix on credit report, every old bad-mark that can be removed if enough time has passed, will improve your score. This could be really important if you’re right on the edge being able to bump yourself into the next better category. That’s when it’s really worth putting some time and effort into seeing what you can fix yourself to get you where you want to be.

Finding Legitimate Credit Repair Services

If you decide you don’t have the time to fix your credit report yourself and can afford to pay for a service, how can you figure out which companies are legitimate and which ones aren’t? This is important because there are plenty of both out there! Here are some signs that a credit repair company may NOT be legitimate:

They want to charge you for your credit report. You are entitled to a free copy of your credit report once a year from the three major credit bureaus (Equifax, TransUnion, and Experian). Any credit repair company who wants to charge you for it shouldn’t be trusted. If part of what you want credit repair services to do for you is monitor your credit report on a monthly basis, there are plenty out there who don’t charge anything for it, or charge very little for it.

They want to charge you up-front for services. You should never have to pay a bunch of money up-front to get started with credit repair services. The most legitimate companies will only charge you based on their performance and getting results for you.

There are no real people to talk to. A credit repair service you can get started with totally online without talking to a real person could be a scam and should not be trusted.

Read customer reviews. See what other customers have to say about working with the company. But don’t trust the reviews on the company’s own website, where negative reviews may be filtered out. Go with independent sites like Yelp, Google, Trustpilot and others. Although there is still a chance that some of the good reviews are fake, the bad reviews are probably real.

Unrealistic promises. A good rule of thumb is that if it sounds too good to be true, it probably is. For example, there is probably negative information in your credit report that is accurate and should be there – any company that says it can remove that kind of information is not legitimate. Any company that guarantees a substantial increase to your credit score should be avoided because there’s no way such an outcome can be guaranteed. And if a company says it can legally create a new identify for you, run away as fast as possible!

As you can see, there is a lot to watch out for when it comes to finding a reputable credit repair company. This is because it’s also an industry known to be full of scammers. So here’s the thing: If you can do the kind of research it takes to identify legitimate credit repair services, you’ve definitely got the skills to do your own credit repairs if you have the time. It also pays to know your rights. As noted in a NerdWallet article:

“Just as laws protect you from unfair reporting and collections, there are laws to protect you from credit repair companies that mislead. The Credit Repair Organizations Act requires companies to give you a three-day right to cancel without charge, a firm total on costs and an estimate of how long it will take to get results.”

If you’re serious about wanting to improve your credit score but want help doing it, consider going with a credit counseling agency instead of credit repair services. Credit counseling is usually a free service offered by a non-profit financial education organization whose mission is to help people get better control of their finances and debts. But if you go to one of these and they say they want to charge you for services, then it’s not something you should do. Search your state’s government website to find out about any free credit and debt counseling services they may offer.

Rebuilding Credit with a Bankruptcy Car Loan

One way to begin rebuilding and restoring your credit after declaring bankruptcy or having a bankruptcy discharged is with a new line of credit and on-time payments. Day One Credit works exclusively with bankruptcy customers to match them up with a lender who specializes in bankruptcy lending to help your make the most the fresh start bankruptcy gives you. We’ve spent years building an amazing network of lenders, and when you apply through Day One, they will all be trying to get your business, and that’s the kind of competition that helps ensure you’ll find the loan that fits your situation.

While we find we can help most people, not everyone is eligible, so be sure to visit the Day One home page and scroll down to “Day One Eligibility Guidelines” to see who we can help and who we can’t. Whether you’ve filed a Chapter 7 bankruptcy, a Chapter 13 bankruptcy, or have had one recently discharged, Day One is ready to help you find the loan and the car you need. In fact, when you fill out our fast online application, you can get an answer back in minutes!

There are many potential benefits to be gained by working with Day One to find a bankruptcy car loan. Besides helping you get your credit back on track, you may be able use it to get out from under a bad car loan. If you owe more on your vehicle than it’s worth, we may be able to help you get out of your upside-down or underwater car loan and get a better deal. We’ll also help you find a great car – something used to get the most bang for your buck, but as recent a model as possible with lower miles and in great shape so you’ll spend less in the long run on repairs compared to an older used car. At the same time, you’re avoiding the huge hit in depreciation you take with a brand-new car. Trust us, we’ve got this figured out through years of experience!

You may have questions about how all this works. Start out by visiting our common questions page to see if the answers are there. If not, contact us and we’ll be happy to talk to you!

Whether you’re in the middle of or about to file for either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, getting the car you need is possible with a bankruptcy car loan. But one thing you have to consider very carefully is what you’ll select for your next ride. This article provides guidance on bankruptcy car loan car choices so you’ll have the information you need to make an informed decision.

Is a Bankruptcy Car Loan a Smart Choice?

Filing for bankruptcy might be the best thing you can do when you want to retake control of your financial life and get out from under a mountain of debt. But what happens when you discover you also need to replace your car at the same time? If you haven’t already filed for bankruptcy, work with a qualified bankruptcy attorney to determine if you should file. If you do file, then you can start working with lenders who specialize in bankruptcy car loans. They may even be able to get you an interest rate better than trying to get a traditional loan before you file. This is because some lenders are only going to look at your low credit score and reject your application. But with bankruptcy car loan specialists, they will look past your low credit score to see how you’re taking actions to eliminate or reduce your debts, which puts you in a better position to take on a new car loan.

What NOT to do with Bankruptcy Car Loan

Remember that the whole point of filing for a Chapter 7 bankruptcy or Chapter 13 bankruptcy is to make a fresh start. You want to make smart choices to make the most of your second chance. Unfortunately, we’ve seen far too many people make one or more serious mistakes. Here are seven things you don’t want to do:

Don’t buy a car for cash.

This would be a serious mistake if you have filed for bankruptcy. Why? Remember that filing for bankruptcy means your credit score is in serious disrepair. One of your primary objectives should be rebuilding your credit so you’ll be in good shape for your financial future. Paying cash for a car won’t help you rebuild your credit. One way to rebuild your credit is to get a new loan and make on-time payments. A bankruptcy car loan is a great way to do this.

Beware of a BHPH car loan.

BHPH is an acronym that stands for “buy-here-pay-here” car dealerships, meaning they offer what is called “in-house financing.” Be sure to find out if it is a reputable dealer! We’ve heard that some BHPH dealerships are notorious for saddling customers with horrible loan terms. At Day One, we rely on a network of fresh start program lenders we’ve developed over years of helping bankruptcy customers.

Don’t buy an older car with high miles.

When you make the mistake of buying an older vehicle with high miles because the price seems too good to pass up, you’re running the big risk of paying a lot more over time in repairs because the car isn’t in good shape.

Don’t buy an expensive luxury car.

Even if you were to get approved for a loan to cover an expensive luxury car, this would be a mistake because the monthly payment is probably going to be a big stretch for you. Then you may be shocked at how expensive it is to maintain and insure a luxury car properly. Before you know it, you’re trapped in a loan and a car you can’t handle financially, which is the exact situation you don’t want to be in when you’re trying to restore your credit after a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.

Don’t buy a brand-new vehicle.

Buying a brand-new vehicle seems like a good idea because you know it ought to be reliable for years, but what you’re not considering is the depreciation factor. A new car drops in value by at least 10% as soon as you drive it off the lot, and continues to depreciate by at least another 10% during the first year. It continues to depreciate by anywhere from 15-25% for another several years. The downside of this is that you’ll be “underwater” or “upside” down on the loan for years, meaning you’ll owe more on the loan than the car is worth. Buying a high-quality used car that’s a newer model with lower miles means you don’t take as much of a hit from depreciation – the previous owner took the hit. You get a lot more car for a lot less money when you buy the right used car.

Don’t buy a salvage car.

Salvage cars seem like an attractive choice because they are so cheap, but buying one is one of the worst mistakes you could make. On the surface it looks like it’s fine, but how do you know it was repaired properly? Salvage vehicles almost always end up having all kinds of serious problems that end up costing you way more to fix than you could imagine. We recommend never buying a salvage vehicle!

Don’t buy a car you can’t afford.

When you’re trying to rebuild your credit after filing a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, you need to be very careful about how much new debt you take on with a bankruptcy car loan. If you aim too high and buy a car you really can’t afford, you could end up missing payments or defaulting on the loan, which won’t help your credit. By making sure you buy a car you can afford, you’ll be able to make the on-time payments needed to restore your credit. Stay on the safe side and set yourself up for success with a car you can definitely afford.

Best Cars for Bankruptcy Financing

By listing seven of the big mistakes we’ve seen people make when they need a car during or after a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, it should now be clear what you should focus on to make smart choices with a bankruptcy car loan: You want to spend time figuring out what you can comfortably afford for a payment, then find a newer used car in great shape with low miles. Here are the kinds of cars satisfied customers have purchased recently with a bankruptcy car loan:

Nissan Altima

Hyundai Sonata

Toyota Camry

Toyota Corolla

Kia Optima

Hyundai Elantra

Nissan Sentra

Honda Accord

Dodge Journey

These are the kinds of cars that our customers have found to be reliable and affordable choices for a bankruptcy car loan.

But there are some other smart choices you can make that will help ensure you get the most out of your purchase and protect yourself financially. One of the most important things is making sure you get GAP (guaranteed asset protection) insurance. If your car gets totaled, the insurance company is going to pay out the market value of the vehicle. The amount of the insurance payment will probably not be enough to cover the full balance of what you owe on your loan. GAP insurance will cover that difference – and it’s an inexpensive way to make sure your loan will be paid in full if the car is a total loss.

It might also make sense to purchase a service contract with your vehicle. If your car suddenly breaks down or needs repairs, a service contract takes the sting out of getting the work done. Service contracts vary in terms of how long they last, what is covered, and whether or not there is a deductible. They often include roadside assistance and rental car reimbursement as well. At Day One, we’ll help you figure out what kind of service contract will best serve your needs.

Day One Credit: Your Bankruptcy Car Loan Specialist

If you’re dealing with a Chapter 7 bankruptcy or a Chapter 13 bankruptcy but also need to replace your car, Day One Credit is ready to help you make all the smartest choices to find a bankruptcy car loan. Our network of lenders are the ones who specialize in meeting the needs of bankruptcy customers, and when they compete for your business, you come out ahead! Our fast online application process will get you an answer in a matter of minutes and you’ll be ready to make the most of the fresh start filing bankruptcy gives you to rebuild your credit. Need more information or have questions? Contact us today!