When consumers in distress turn to bankruptcy for financial relief, they are seeking a clean slate from which to make a fresh start. They are often discouraged when they realize that, when it comes to their credit score, the springboard to their economic future still seems waterlogged. Bankruptcy typically lowers an already damaged credit score by an additional 160 to 220 points. While the initial effect of bankruptcy is a low credit score, proactive consumers can do much to improve their FICO score. In fact, one of the benefits of getting an auto loan after bankruptcy is the positive result it will have on a damaged credit report.

To understand how a vehicle loan helps bankrupt borrowers recuperate, it helps to know how a FICO score is calculated. The credit reporting agencies don't divulge their exact formula for coming up with that all-important number that is the lifeblood of being deemed "credit-worthy." Thanks to consumer advocates and ensuing legislation, however, consumers are more informed about factors that are considered and how they stack up to comprise a credit score. Payment history comprises 35 percent of a credit rating.

The heaviest determinant, payment history, is hit hard prior to a bankruptcy. Following a bankruptcy, most revolving and installment accounts have been discharged, leaving the consumer with no recourse for supplanting positive information in the payment history of the credit report. A car loan after bankruptcy is a type of installment loan that is the easiest to get. Even if the interest rate is high, an installment loan opened as soon as possible and paid on time will make a big impact on a credit score within a year.

Consumers might benefit from taking out even a high-interest car loan as soon as possible. Even if the payment is high, if the borrower takes a steady approach to building credit, then it will likely be possible to refinance that high interest rate into a lower payment when it comes time to apply for a mortgage. Then, the consumer has the best of both worlds: a long-standing credit account with a good payment history and a low car payment that falls below the recommended 10 percent threshold. Both of these factors will increase credit score and make the borrower more attractive to mortgage lenders.

To those who are overextended and drowning in debt, bankruptcy is a way to close the floodgates. However, credit scores still need to be repaired, and a vehicle loan after bankruptcy is a good way to recuperate from credit damage.