After Bankruptcy: Please Don’t Go Right Out and Don’t Co-Sign for a Car
Got an email last week that made me sad. Cherry filed Chapter 7 bankruptcy back in 2017. She recently went to buy a car and ended up getting financed by Santander at 21%. After she did that, she asked why is her credit score so low, four years after bankruptcy?
When I looked at her credit report, here’s what I saw. Two months after her bankruptcy was discharged, she got a car loan with Regional Acceptance. Regional Acceptance finances cars at terrible rates for people with terrible credit.
I asked her, didn’t I warn you not to try to finance a car until at least two years–three is better–after the bankruptcy? She said she didn’t “finance” a car: she just “co-signed for a friend.”
(The friend, of course, only paid for a year; and then the car got repossessed. Obviously the friend had really bad credit; so bad that Cherry right out of bankruptcy was needed as a co-signer.)
Instead of having the best credit of her life, four years after bankruptcy, Cherry’s score is stuck in the mid 500’s. And Regional, if they bother, has two more years where they can sue and garnish her.
Two lessons. First, if you have any way at all to get to work, do not finance a car until two years after your bankruptcy is discharged. Second, don’t co-sign for anybody whose credit is worse than yours. Ever.
Please Don’t Co-Sign for a Car and Mess Up Your New Start in Life
Improving your credit score is one of five ways that bankruptcy gives you a fresh start. Three years after bankruptcy you can have as good a credit score as anyone you know. Don’t mess that up. Don’t co-sign for a car for a friend.