Discharge soon, how much improvement in credit rating to purchase car ?

[overstressed]

Hi All

We only have 2 more long months until our Chapter 13 is discharged. We have 2 older cars that are in terrible disrepair and are constantly in need of service. We have spent over $4000 on repairs in the last year and now our 14 year old car needs a new transmission, not really worth the $5000 repair bill. We have had a few offers from dealerships saying we can get approved even in Chapter 13 for a new car loan. We went to talk to these lovely scumbags one day and they kindly offered to get us into a new car loan for a low monthly payment of $500+/mo for a $23,000 car at an 18% interest rate. We told them there was no way we would feel comfortable paying that high of a rate and maybe we should wait until the BK was discharged and we could qualify for a lower rate. We told them there was a reason we were successful in our payment plan(because we were not buying things we could not pay for) They told us it wouldn't make much of a difference a couple of months past the discharge. Our credit ratings were in the mid 600's

Do any of you know if our ratings change at all after discharge and if it helps with interest rates ? I would rather take my husband to work and pick him up each every day for a few months if we dont have a car than to pay too high of an interest rate.

IF anyone has any experience in this we would truely appreciate it! Thanks

[memuzz]

I would definitely wait to purchase another car whether new or used after your case is discharged. The discharge process can take a few months after your last payment. My case was discharged last July. The wage garnishment order ended about a month prior to the discharge. We had a car that we purchased while the case was open but paid outside of the plan. The car started having transmission problems and would have cost nearly $4000 to fix it. We waited until our case ended and looked around for a new car. We were able to finance a brand new car but had to absorb part of the old loan into the new one. However, we got a lower interest rate than if we had tried to finance the car while in bankruptcy and qualified for a brand new car.

You should start receiving offers for purchasing a car once the court discharges your case. I received it seem like a letter everyday for nearly 2 months until we purchased our new car. I would definitely look around, save money for a down payment and then maybe ask your attorney for help. They maybe able to advise your where to look to purchase a good car with a decent price and interest payment. Good luck. It will be over sooner than you think.

[kornellred]

In order to improve your credit scores, you must actually use credit. Your scores will not go up merely because you have completed your Chapter 13 plan. In order to obtain credit, hard credit inquiries will be done, which will actually lower your scores by a point or two each time. There is no question that creditors will impose a higher interest rate on those with a bankruptcy on their public record, but there is too wide a spectrum of possibilities in that regard to be able to make a valid general statement about what to expect from lenders who make loans for vehicles.

[LadyInTheRed]

If you are continuing to spend a lot on car repairs, a high interest rate may be a better way to spend your money. After making timely payments for a year or two, you can refinance for a better rate.

If you can go a while without having to make major repairs, get whatever credit card you can qualify for, use it and pay it off each month to improve your score.

[papie]

It is unlikely that your score is going to shoot up as soon as your bankruptcy is discharged, and certainly not enough to qualify you for a low interest loan.

And I'd like to agree with LadyInTheRed, sometimes dealing with the interest rate is cheaper than paying for car repairs. We were in this situation last year. We had an old car that was averaging hundreds per month in repairs. We financed $13k with a pretty high interest rate, but it's a 2009 Honda Civic with 28k miles. Our bankruptcy will be over this year and we'll be able to pay extra on it every month, so it should be paid off in under two years, we have no massive car repairs to worry about, and we are establishing some positive credit.