Awaiting Discharge

[bkandhappy]

We have been living on cash for a year now, while i was freaking out at first its now pretty easy, it sure makes spending a lot easier for sure. We also for a first time in a long time finally have a savings account as well. I am in no rush to get any credit any time soon we are happy as a cash only family now.

[shipo]

We have been living on cash for a year now, while i was freaking out at first its now pretty easy, it sure makes spending a lot easier for sure. We also for a first time in a long time finally have a savings account as well. I am in no rush to get any credit any time soon we are happy as a cash only family now.

I was on a cash only basis between mid 2013 and early 2020 when my Chapter 13 was finally discharged, and while I managed reasonably well, I immediately went out and started the process of getting a new credit card. Why? In no particular reason:

• Renting a car without a credit card with at least a $2,000 limit has proven to be a challenge.
• I want to rebuild my credit rating so I can qualify for a good mortgage in early 2022 (two years after my discharge).
• While my car is impeccably maintained, is in great shape, still looks nearly new, and performs great, it is also 14 years old and has 170,000 miles on it. There may well be a time when I'll need to apply for a car loan (unless I want to buy another old car).
• For the latter two, having a credit card is a great way to build one's credit rating so other loans can be had, or can be had lower interest rates.

Some folks might suggest I pay cash for my next car (as I did the car I bought during my fourth year of Chapter 13), but the fact is, I'd rather buy new (or newish), and given the very low interest rates on car loans, it actually costs less to finance a car than it does to pull the purchase price out of other investments.

I look at it this way; credit is a tool, use it properly and you will virtually always come out ahead financially.

[Cronin]

That’s good to know! I’ve been reading the posts about credit rebuilds. I’m in no rush for credit cards at this point. Pre divorce in 2017 and then the bankruptcy I always had an excellent credit score and payment history. I’m hoping some of that positive information will help my credit rating. I plan to run my reports weekly to see where the score goes post discharge.

[justbroke]

The dealerships are (or were) giving cars away the last 2 months. My friend went into a dealership with marginal credit, demanded a lease, demanded no shotgun of the credit (only the manufacturer's financing arm), and demanded that she'd pay no more than $300/month for the lease. That's after she already picked out a $32,000 car. She put down $2,500 but the 2021 Honda Accord Sport car's sticker was $32,315. The cap cost was reduced to somewhere just over $27,000 with all the discounts they applied to get the lease price down. Her lease is 3 years at $300/month. (Normally that would be over $400/month.)

Personally, the pricing is good right now but I have been biting my lip hard to avoid buying a new car. I want a Tesla so bad!

[Cronin]

That’s good to know justbroke. I’m wondering if I should try to get out of my 22% auto loan by attempting a refinance with my local credit union. I didn’t reaffirm the loan which my attorney said he never recommends. Plus there will be no repayment history on my credit report if I keep the loan with the current lender.

[justbroke]

Cronin, I had a 19% rate when I used a 722 Redemption loan (from US Bank) to redeem my vehicle in the Chapter 7. I refinanced it about 6 months after discharge at 7.49%. You definitely want to get out of the 22% loan, even if the new loan is 15%.

[Cronin]

Absolutely justbroke! I’m going to try my local credit union. I did not burn them in bankruptcy and did have auto loans with them several years ago with an excellent payment history. Plus my attorney told me to be sure not to miss or be late on a payment as they could just take the car. The loan is with Credit Acceptance and from what I’ve heard they’re not a great company to do business with.

[Cronin]

Great news! My Chapter 7 discharge was on 7/13th and I was approved today for a refinance auto loan at 6.99% through my local credit union. So happy to get out of that 22% auto loan! The credit union mentioned a credit builder card as well to help boost my scores.

[justbroke]

Excellent!

[Cronin]

Justbroke they mentioned a credit builder card with a $350 credit limit. I just need to keep the purchase below 10% of that limit and pay the balance in full. I tried the prequalify online for Discover and Capital One both denied. I was surprised with Discover as I had a card with them several years ago no issues 10k limit and paid in full and I closed the account. Capital One didn’t surprise me I burned them in bankruptcy for about $1,000. The credit union card and auto loan will be a good start. I got a preapproval in the mail today from Credit One, $2,000 limit and $75 annual fee. I have until the end of August to respond. I know 3 cards are ideal for a rebuild but I’ll wait for now.

[shipo]

Justbroke they mentioned a credit builder card with a $350 credit limit. I just need to keep the purchase below 10% of that limit and pay the balance in full. I tried the prequalify online for Discover and Capital One both denied. I was surprised with Discover as I had a card with them several years ago no issues 10k limit and paid in full and I closed the account. Capital One didn’t surprise me I burned them in bankruptcy for about $1,000. The credit union card and auto loan will be a good start. I got a preapproval in the mail today from Credit One, $2,000 limit and $75 annual fee. I have until the end of August to respond. I know 3 cards are ideal for a rebuild but I’ll wait for now.

I got the same offer from Credit One a few weeks back; I reviewed the terms and promptly chucked it in the trash. Since my discharge I've received probably a half-dozen such offers, most with both annual fees and/or monthly fees, very low limits, high interest charges, and draconian tack on fees; they also ended up in the trash. For my part, I refuse to pay excessive fees and have opted instead for a secured credit card. After opening, trying, and closing a Capital One secured card with a $1,000 limit, I got a secured card from my bank with a $5,000 limit. Yes, I've tied up that much in a security deposit for seven months, but now I have a card with a reasonable limit, one percent cash back for all purchases, two percent cash back for gas and groceries, and three percent back for dining out.

Long story short, if you can afford to tie up some money for a few months, shop around, in lieu of fees, you can instead collect interest (on the deposit), and cash back from your purchases.

[justbroke]

Right now you're too close to the discharge date and your case may not be closed. Even if it is closed, I'd wait 6 months to try for any majors, such as Discover. Additionally, the $350 starter card is not a bad idea since it is from the credit union. Your plan to keep the reported balance below 10% is good. Definitely keep it below 30%. Credit One is an "okay" builder card as well but you'll want to grow from there and eventually dump them once your CU likes your more! (Credit One should be dumped after the first year as they may have "monthly" fees that kick in. It's a good "starter" but not a good finisher! It won't grow that big, either.)

[Cronin]

Thank you shipo I thought the fees and interest seemed high. I’m going to start with the new auto loan and $350 credit card from the credit union and give it a few months to reflect some positive payment history.

[Cronin]

Justbroke I was thinking I might be too quick out of the gate to try those cards. At least they were only prequalifies so no hard inquiries. I checked PACER and the docket indicates that the case closed on 7/17th. Yay!!! Also, the credit union did tell me that my Equifax score is 640.