Bankruptcy, Foreclosures, and Repossessions

If you have had a car repossessed, a house foreclosed on, or have declared bankruptcy, it will significantly affect your ability to get new credit. Information about a foreclosure or repossession can stay on your credit report for seven years. A bankruptcy can stay on your credit report up to 10 years.

If you are in one of these situations and want to apply for a new loan, there are several things you can do. First, you can write a letter to the new lender explaining why the problem occurred. For example, perhaps you were seriously ill, recently divorced, or lost your job.

Another suggestion is to wait a few years before you apply for a new loan. The length of time you must wait will depend on the lender’s rules and the size of the loan for which you are applying. During that time, make a strong effort to reduce your debt and pay your bills on time. When you apply for a loan again, make sure the lender knows the steps you have taken to improve your credit.