Credit scoring models are often very secretive. We may not know all of the subtle nuances, but through seeing and hearing of experiences from others, or often just reading articles (like on this website) and talking to people, we can figure out a good portion of how credit worthiness is calculated. Of course, every lender is different. And, generally the more time that passes after a bankruptcy or previous bad credit, the better.
While some lenders or companies issuing credit may only look at your rebuilt credit (usually at least 1 year of rebuilt credit after bankruptcy, but often 2 or more years), I know for a fact that some of them will look at your credit worthiness prior to you filing for bankruptcy. Let me share with you three spersonal examples I encountered while trying to obtain credit after bankruptcy:
1. Bell Canada would not let me have a land line or cell phone because I included a personal land line, business land line and a Bell Mobility cell phone bill in my bankruptcy. To this day, I do not have any services from Bell.
2. Late last year, when I was financing my first car after bankruptcy (a little over 2 years after my discharge) I was told that I might have better luck getting a lease or finance from Toyota Canada because of my previous lease with Toyota Canada that I was paying during the 18 months prior to my bankruptcy. I had a perfect payment history, but once I decided to declare bankruptcy, I was actually going to just walk away and do a “voluntary repossession” by dropping my leased car off at the dealership. Fortunately I found someone to take over the lease, thus resulting in absolutely no negative consequences. As it turned out, Toyota Canada turned me down after all and I got financing from TD Financing Services just when I thought all hope was lost. Otherwise I would have gone to a Ford dealer, as they are typically the most lenient with less-than-perfect credit.
3. Although I haven’t purchased a house yet (as I had to move to help my elderly parents), I chose to postpone getting a mortgage for at least another year. That will give me time to save up for a bigger down payment and build up my credit even more with the car loan, two secured credit cards and a Fido cell phone bill reporting to my credit profiles. But according to several mortgage brokers who work with “after bankruptcy mortgages” I was told that some lenders look at your credit history prior to the bankruptcy. So, if you were keeping up with your bills, but just came to the conclusion that you’ll never be able to pay them all off and declared bankruptcy, you’re better off than someone who had accounts in collection, repossessions and/or was chronically late with every bill as far back as the credit report goes.
In today’s more fragile economy, now more than ever credit guidelines have been tightened up. Gone (probably) forever are the carefree and sometimes even unsophisticated credit requirements of days gone by. Now they look at everything – current credit obtained after your bankruptcy discharge and many lenders look at how you managed credit before the bankruptcy. In some cases, you may have been able to carry some credit during the period where you were undischarged bankrupt, such as a leased car (which has no equity), or a mortgage on a house with little or no equity. You can be sure they’ll look at that.
So, if you had reasonably good credit prior to the bankruptcy (and many people did), you’ll probably be better off that those who had a spotty credit history. And if your credit prior to the bankruptcy was horrible, don’t despair. Some lenders will be more interested in your rebuilt credit. After all, what happened in the past is history. If you’re a changed person who is responsible with credit now, that may be enough.
There’s no blanket statement that will cover every lender or credit issuer. Although many will look at your pre-bankruptcy credit, some may not. You may just have to wait a little longer and work a little harder at rebuilding your credit. Regardless of how your credit was prior to your bankruptcy, you should be doing everything in your power to establish good credit. The easiest way is to get a Peoples Trust secured MasterCard or a Home Trust secured Visa card. Sure, you will need to save up for the security deposit, but in our current economy it’s one of the few ways you’ll be able to reestablish credit after bankruptcy – because although not everyone will look at, or put as much emphasis on your old credit history, you can be sure every single one of them is going to look at your credit history after the bankruptcy discharge.