Expert: Joe Montgomery - 5/9/2007

Question
My credit is not good.  I fell be hind on all credit cars and my automobile.  Back in October of 2006 I call Ford Motor Credit Company to come and pick up the vehicle because I could no longer afford to keep it. They picked up the vehicle and it was auction off in November of 2006. Lucky for me the car was auction off for more then it was worth and Ford sent me a check for $347.00. When I filed my taxes in January of 2006 for the 6 months that I did work that year, I paid off every negative item on my credit report. I made the mess so I clean up the mess on my own. So now I have no debt at all.  I pulled my credit report and everything that I have ever had is now showing a balance owed as zero because I paid everything off.  Now I have no credit at all. I know the negative things will be their for 7 years but all negative and positive debts is now showing a balance owed of zero. The automobile is showing as voluntary surrendered. Now I need to try and reestablished my credit because I now have none.  Do you think it would be possible for me to get another auto loan or a personal loan to try and reestablish my credit. I'm looking toward a used automobile maybe a 2002. What are my chances of getting another automobile or even a personal loan for $4000? Since I paid everything off I get so many pre-approve credit card offers in the mail that you would think that I went and filed a Chapter 7.  

Answer
I would think it would be reasonable that you would get approved for an auto loan.  I would recommend that you try and have at least $500 to put down on the car so that the auto dealer will have a "positive" selling point to a potential lender.  The voluntary repossession will scare a lot of lenders away from you, and to be honest, it would probably be more easy for you to qualify with the repossession had you actually filed bankruptcy.  A lot of lenders don't see the difference between filing BK and writing everything off and having all past due debts, but working you way back to "0" by paying things off.
Anyway, my point is, if you have money down, I have no doubt you will get qualified for an auto loan, just be prepared to pay 16-21% interest, and a personal loan at this point would be out of the question.
Good luck, and congratulations on taking responsibility, and working to improve your credit profile and self respect.