See If You’re Prequalified For Any Credit Cards
Many credit card issuers have an online prequalification tool. After you fill out a form with some basic information, this tool lets you know if you’re prequalified for any of that issuer’s credit cards. That’s not a sure thing, but it means you have solid odds of getting approved for a credit card.
Be Smart About Applying For New Credit
Each new credit application prompts a on your credit report. Too many hard inquiries in a short period of time can hurt your credit score because lenders see it as risky behavior.
If youre frequently denied for new credit cards, their requirements might be too high for you current credit profile. Keep an eye on your credit and be aware of issuers underwriting standards, so you apply for credit more wisely.
Try a or become an authorized user first. You can also sign up for a rent reporting service that reports your rent payments to the credit bureaus. Having a more positive credit history will increase your chances of being approved for credit cards with stricter requirements over time.
Isn’t Taking On More Debt After Bankruptcy A Bad Idea
It might seem strange to take on more debt shortly after a bankruptcy discharge … shouldnât you be trying to avoid that?
Well, yes and no. The key is to have a manageable amount of credit. This will help you build a stable credit history. Making regular, on-time payments on your account shows future lenders that you’re a reliable borrower.
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Avoid Unsecured Credit Cards After Bankruptcy
There are a handful of unsecured credit cards aimed at consumers with bad credit, such as the . The majority of these cards come with very low credit limits, high APRs of between 25% and 29.99%, and annual fees that can easily exceed $100 a year. Some also have a one-time processing fee to open the account and monthly servicing fees on top of the annual fee. In short, you pay a lot for the privilege of avoiding a security deposit.
Similarly, store credit cards also have lower qualification standards, so a bankruptcy may not disqualify you. But these, too, come with low limits and high APRs, and usually have limitations on where they can be used.
Because of their fees, unsecured credit cards for bad credit typically are more expensive than secured cards. There are plenty of secured cards that dont charge annual fees, and you can get your security deposit returned as long as you pay your balances off in full every month. But with these unsecured cards, the fees you pay wont be returned.
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How Can I Rebuild My Credit After A Bankruptcy
You may find it easier than you would expect. There’s no doubt that after a bankruptcy, your credit score will be thrashed, and the bankruptcy will remain on your credit report for seven to 10 years . There’s no minimizing the financial “fun” of a bankruptcy.
That said, rebuilding your credit after a bankruptcy can definitely be done. Your first move should probably be to apply for a secured credit card. These are credit cards that work like any credit card, except for an important distinction: you’ll put down a refundable deposit and then use the secured credit card to make purchases.
After a year or two of using the secured credit card responsibly, the credit card company you have the card with will likely give you that refundable deposit back – and invite you to apply for an unsecured credit card with them.
That said, you may be able to successfully apply for a no-frills, or not many frills, credit card designed for people with fair or bad credit. You could try doing that before applying for a secured credit card, if you’re not excited about paying money upfront, money that, again, is refundable.
In any case, you should find with a few select credit card issuers and lenders like car dealerships, that life still goes on, and you’ll still be lent money . After a bankruptcy, with your worst debts hopefully discharged and behind you, lenders know that you probably have more money now to pay off anything you borrow.
Should I Get A Secured Credit Card After Bankruptcy
Oct 7, 2021Bankruptcy
After a bankruptcy, its not only a good idea to get a credit card to start rebuilding your credit, its absolutely necessary. Unless you start rebuilding your credit, it will be difficult, if not costly, to obtain auto loans, rent an apartment or house, or eventually get a mortgage.
When you first obtain a bankruptcy discharge, your credit score is going to take a hit, however, if youre like most bankruptcy filers, your credit was not that good when you filed for bankruptcy. If you had any late payments and collections before the bankruptcy, your FICO score was already suffering.
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An Alternative To Getting A Credit Card After Filing For Bankruptcy
If you are unable to qualify for a regular credit and a secured credit card, yet you still want to have a credit card, you should explore the option of adding yourself as an authorized user on another persons credit card. That said, once you add yourself as an authorized user to another persons credit card, their credit cards history will appear on your credit report. As such, you should only place yourself as an authorized user on a persons credit card that you trust and know is responsible enough to continue making timely payments on his account. This is so because if he fails to make a payment on the credit card, the negative information will appear on your credit report, lowering your credit score.
Get A Protected Charge Card
After personal bankruptcy, its not likely that youll getting accepted for an unsecured credit card. Protected bank cards operate similarly to unsecured cards, nonetheless need a security deposit. For instance, if you put in a $1,000 security deposit on a secured credit card, youll getting recommended for a $1,000 credit limit. Guaranteed charge card issuers arent as focused on your credit rating whenever approving your as financial obligation try supported by the safety deposit. Whenever make purchases and timely money regarding cards, your credit history is actually reported on credit reporting agencies, assisting you to create right back a few of your own credit.
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Why Isnt A Credit Card Always A Creditor
A credit card isnt always a creditor because the bankruptcy code defines creditor as someone who has a claim for money against the debtor.
- If there is a balance on the card, then the credit card company has a claim for that balance, and is a creditor
- If there is no balance on the card, then the card company doesnt have a claim, and they are therefore not a creditor
So a card without a balance does not need to be listed in your bankruptcy, and the credit card company might decide to let you keep it open.
Check Your Credit Report To Ensure Your Bankruptcy Is Accurately Recorded
Bankruptcy seriously damages your credit report, but there can be errors that make it worse than it actually is. For example, debt shown as active or late instead of discharged might harm your credit report.
Be sure to review your after bankruptcy. If you spot an error, dispute it as soon as possible. Lexington Law can often help you to work to remove bankruptcy related items from your credit report.
Many consumers find unfair credit reporting and outright inaccuracies. Be aware that your old bankruptcy shouldnt linger on your report after seven years or 10 years have passed.
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What Unsecured Credit Cards Can I Get After A Bankruptcy
If an unsecured credit card is really what you’re after, it’s still an option, but proceed with caution.
If you filed a Chapter 13 bankruptcy, you may find it relatively difficult to qualify for an unsecured credit card. Depending on your trustee’s plan, you may be making partial payments on existing credit card accounts, making it tough for new banks to accept your application. However, if you filed a Chapter 7 bankruptcy, you may notice a near flood of pre-qualified credit card applications in your mailbox a few months after your discharge posts to your credit reports.
Banks know that you’re unable to file for bankruptcy again for another seven years, reducing the risk of default. While you might not hear from a bank that you included in your bankruptcy filing, you could hear from their biggest competitors. Just be sure to watch out for subprime lenders and scam offers during the first few years after your discharge. They’ll send ads for credit cards for poor credit that actually only entitle you to heavily marked-up retail goods, and some subprime Visa and Mastercard issuers charge exorbitant application fees and monthly service charges in addition to high APRs. Their marketing pitches suggest that you won’t find a better deal after bankruptcy, but in reality, you could save up what you’d otherwise pay in fees, park that cash in a secured credit card’s linked deposit account, and get that money back after you’ve graduated to a stronger, unsecured card.
Why Consider A Secured Card
After bankruptcy, debtors dont usually have any trouble getting traditional, non-secured credit cards, only their terms are not very attractive at first. As time goes by and as the debtor rebuilds their credit, they will qualify for more attractive credit terms. Beware, secured cards, in particular, can come with hefty application and processing fees, high-interest rates, and sometimes no grace period.
Essentially, the only reason why someone should go with a secured card is if they cant qualify for an unsecured card because their credit is in that bad of shape. Otherwise, most bankruptcy filers are better off with unsecured credit cards when they have the choice. Still, its important to take your time and shop out the best credit card offers.
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Prepaid Vs Secured Credit Cards
I thought I had found the solution. A prepaid credit card. Money Mart offers the Titanium Plus prepaid MasterCard. You simply go to the local Money Mart or Insta-Cheques store and give them some cash to put on it, plus a bit extra for a set up fee when you first open it. Then, if you give them $150, your card has a $150 limit. Next week you put $500 on it, and thats your new limit. Kind of like a bank debit card linked to a bank account, but its got a MasterCard logo on it and its treated just like a real credit card in most cases. You simply pay an activation fee, a monthly fee and lots of other fees. But hey, whos complaining? When you think thats your only option, you take what you can get, right? I was back in the game or so I thought.
So much for a fresh financial start, eh? I discovered that with the ever more strict credit requirements that nobody was going to extend credit to me until a bit more time had passed from by bankruptcy discharge and until I had at least one year of re-established credit. But how was I supposed to have one year of re-established credit if nobody would extend credit to me?
Will Applying For A Credit Card Hurt My Credit Score
When you apply for a credit card, issuers will check your credit report to see if you qualify. This check will be indicated on your report and may temporarily lower your score. This may feel like a catch-22 for people recovering from bankruptcy: you need a credit card to help repair your score, but applying for cards may actually hurt it. For this reason, we recommend you only apply to a secured card meant for people in your situation. That way, you’ll only need to apply once and you won’t have multiple credit checks listed on your report.
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The Ascent’s Best Credit Cards After Bankruptcy:
Balance Transfers: 10.99% Intro APR, 6 months
Regular APR
- Can graduate to an unsecured card
- Minimum deposit amount
On Capital One’s Secure Website.
On Capital One’s Secure Website.
Intro APR
- Can graduate to an unsecured card
- No minimum credit score required
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Is It A Good Idea To Get A Credit Card After Bankruptcy
You may think that it’s smart to stay away from credit cards if you’ve recently filed for bankruptcy. After all, credit card misuse may have been one of the factors that contributed to your insolvency. But using a credit card responsibly is actually one of the most effective ways to rebuild your credit score.
It’s true: if you obtain a secured credit card and proceed to use it wiselycharging a few reasonable amounts every month, and paying off the balance in full and on timeyou’re demonstrating that you’re a responsible borrower who can be trusted to use credit as intended. Your credit rating, as a result, will start to recover.
Note that activity on a prepaid credit card is not usually reported to credit bureaus, so you can’t use them to rebuild your score.
Bankruptcy Can Cause A Big Hit To Your Credit Scores Which Can Make It More Difficult To Get Approved For Many Credit Cards And Loans In The Future
But by using the right card strategically after bankruptcy, rather than using only a debit card or paying cash, you can start to get your credit back on track.
Here are five cards that may help, depending on your situation and needs.
Youll also earn unlimited 1% cash back on all other purchases, and theres no annual fee. As an added bonus, Discover will match all of your earned cash back at the end of your first account year.
Though this card features several perks, it comes with a pretty big asterisk: If you dont pay your statement balance on time and in full, youll be faced with a high variable purchase APR of 22.99%.
Its important to note that this is a secured card that requires a refundable security deposit equal to the approved credit line. After eight months, Discover will review your account. If youve been making on-time payments and otherwise using the card positively, Discover may return your security deposit and upgrade your account to an unsecured line of credit.
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How Can A Credit Card Help You Build Your Credit
A credit card helps you build credit based on the simple fact all your movements are reported to the three credit bureaus Experian, Equifax and TransUnion. Once youre approved, you will slowly improve your credit score if you use your credit card responsibly. For example, make sure you pay your credit card bill early or on time each month. In the meantime, strive to keep your credit utilization below 30% for the best results. This means maintaining a balance of $3,000 or less for every $10,000 in available credit you have.
Why A Credit Card Company Will Cancel Your Card When You File For Bankruptcy
When preparing to file for bankruptcy, it is common for a potential filer to want to “exclude” a particular debt from the bankruptcy petition, such as a credit card used for work expenses or a beloved pet’s medical expenses. No matter how important the card might be, excluding debt is not an option when you file for Chapter 7 bankruptcy. Bankruptcy law requires you to list all of your debt on your bankruptcy petition, without exception. In other words, if you owe a creditor money, the creditor must appear on your petition.
This rule, however, goes a step further. Even if you don’t owe a balance on your credit card, you must still list it in your bankruptcy papers. A revolving credit card account is a type of contract, and your contracts are automatically canceled by bankruptcy, including credit cards, leases, and secured auto loans, to name a few. As a result, once your credit card company finds out about the bankruptcy and realizes that it no longer has a contract, it will cancel your card because it won’t be able to enforce any ongoing obligations. Simply put, without a valid agreement in place, the credit card company will not be able to make you pay for your purchases.
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