Getting decent auto loans after bankruptcy isn’t as hard as you might think. In fact, it is a common misconception that you will not be able to borrow money for seven to ten years after filing for bankruptcy protection. While it’s true that the bankruptcy will be reported on your credit report for seven years if you file Chapter 13, and for ten years if you file Chapter 7, it doesn’t have the same impact over time.

True, you won’t be getting the 0% interest auto loans you see on TV, but quite frankly the “well qualified buyers” referred to in the fine print of those ads are quite rare. The highest credit scores are not necessarily obtained in any logical fashion. You would think that getting a car loan and running up a couple of credit cards and then paying off everything on or ahead of schedule would establish you as an ideal credit client, but that’s not how the system actually works.

Credit Score Calculation

FICO scores, calculated slightly differently by each of the three big credit reporting agencies in the US, are the critical number in determining an individual’s credit status and what kind of interest rates they can get. In addition to using available credit and paying as agreed, other factors affect the score as well. These include income and total credit available, proportion of available credit that is actually being used (debt to credit ratio), etc.

These details may bring down the credit score of otherwise excellently qualified buyers, and understanding how they work can help you if you are looking for auto loans for bankruptcy too. For example, if you have credit cards, make sure you owe less than half of what you are authorized to charge on each card.

Also, following a bankruptcy, most of your accounts will be settled and closed. After a couple of months have passed, get a copy of each of your three credit reports and make sure that the accounts are reported as closed. Even if you are applying for a subprime auto loan, you certainly don’t want a potential lender to write you off because they think you already have all the credit you can handle, even if it is on an account that you don’t intend to use.