I recently ran into a very important issue that I should have seen coming. When my bankruptcy was discharged in November I assumed that my lawyer had filed a re-affirmation agreement with the bankruptcy court to keep 2 of my credit accounts active. One was for my truck, currently our only means of transportation and the other for a Kay’s Jewelry card that we had applied for about 2 months before we decided to file. I went through my paperwork for the bankruptcy and I found the notice I had seen before about how I would continue to pay on them and keep the collateral for the credit. Not knowing any better, I thought that was the re-affirmation agreement. I found out I was very very wrong. As long as I pay the bills I can keep the items (truck and a watch) but they could no longer report to my credit report. I was livid to say the least.
I contacted American Honda Finance (the loan holder for my vehicle) and asked if the agreement could still be filed and told that normally, after 2 months have past its not possible to amend the bankruptcy. I also did not want to run the risk of re-opening it in-case the IRS decided to make a move on my newly established savings accounts.
My only remaining option of course was to refinance so that I could once again get the credit reported to start rebuilding my FICO score. I went to LendingTree to submit my application to several companies at once and I was very pleased that after submitting my info, even with my horrible FICO and the bankruptcy and a tax lien that I got an offer to refinance from HSBC and RoadLoans.com. The interest rate was only about 2% over what I was previously paying (my last rate was high because of some late payments when I was laid off in 2003) which I was actually surprised about.
Refinancing is going to cost about $400 more in the long term, but the benefit is that for the next 2 years while I’m paying on my truck, it will be reported and help my FICO begin the long climb back to having good credit.
One last note, my current loan was originally for a 7 year loan that was set to be payed off in October of 2011. With the extra payments that I’ve been squeezing in when I can, I’ve managed to move that date up to April of 2011 so far. I had planned on paying off the balance by Feb. 2010 and with the refinancing it will actually move that up to March 2010. There is a great calculator at YoungMoney.com that you can use to determine how much interest you can save and how much shorter your loan will be by making extra payments. Once the truck is payed off, I’ll be 100% debt free and every extra dime we have will go towards saving money for our first home down payment.
