Picking up the pieces after a bankruptcy is no easy task. One way that you can help rebuild your credit history is to get approved for a car loan. It can be the first step back to financial health.

Our consumer-based society is built on options. Unfortunately for people who have filed bankruptcy, the penalty for your financial misstep is a reduction in options. There's only one way to get back on your feet, and that's to prove to lenders that you're no longer a credit risk. One way to accomplish this very attainable feat is to get approved for a car loan.

1. Find out a lender's guidelines. Ask a potential lender what their guidelines are for approving loans for people in your situation. Don't try to hide the fact that you've had a bankruptcy. They'll find out soon enough. This little bit of market research upfront will save you quite a bit of time down the road.

2. Focus your search on three types of lenders. Consider using car manufacturers, banks, or credit unions. While the flexibility of automaker's finance units tends to vary (luxury car dealers don't often lend to bankruptcy survivors), many may be able to extend an offer if they're under pressure to boost their sales. Banks and credit unions are good bets-just be sure to pass on the subprime lenders. These financial companies generally will look to hit you with extremely high rates and/or fees.

3. Know your score. Before you set foot into a car dealership, thoroughly review your credit report. If there are erroneous late reports, you can get them removed and improve your score. You should also take the credit report with you when you visit the dealer. It sends a message that you're well informed and less susceptible to their negotiating tricks.

4. Be willing to lease or buy. Your top priority is to get approved for a loan. You're looking to rebuild your long-term credit worthiness, and the first step is to find someone willing to extend credit to you. If the lender will give you a loan if you lease the car, strongly consider it. It may not make the most financial sense for you in the short run, but it will have very positive long-term ramifications. If the lender leaves the decision up to you, choose the lowest payment you can find.

If you follow these steps, you can align yourself with a lender willing to give you a chance to rebuild your credit history. Overcoming a bankruptcy will be no easy task. But if you follow these steps and subsequently make those car payments on time, you'll find more choices and opportunities the next time you search for a car loan. You can be a survivor-you just need to know how to outwit, outplay, and outlast the credit industry.

Published on April 29, 2007