How Soon After Bankruptcy You Can Get A Credit Card
How soon you can get a credit card after bankruptcy is dependent upon a few factors. For some people, it can take a few years to qualify for traditional unsecured credit cards, while for others, it might not take quite as long.
You cannot apply for a credit card while the bankruptcy process is still underway. All filers must wait to open a new credit account until after the bankruptcy has settled and their debts have been discharged. For Chapter 7, your bankruptcy could be settled through court approval around four to six months after filing. For Chapter 13, the restructuring and payment plan for your debt could cause the settlement with court approval to take three to five years.
Once the bankruptcy has been settled, you are free to apply for a credit card, but that does not guarantee you will be approved. Lets take a look at the different options you will have for a credit card after bankruptcy, and the time it might take to get approved:
How Long After Bankruptcy Can I Get A Credit Card
Although its negative impact gradually lessens over time, a bankruptcy will stay on your credit report for seven to 10 years. This means your options will be limited for some time. Exactly how long you’ll need to wait will depend on the type of bankruptcy you file: Chapter 7 or Chapter 13.
|Type of bankruptcy|
|After about three months|
|Chapter 13||It may take three to five years to discharge the bankruptcy. You should consult your attorney and the lender to see if you can apply for a credit card before then.|
- Chapter 7 bankruptcy, also known as a liquidation of assets, sells off eligible assets to cover as much of your outstanding debt as possible. The bankruptcy and debts associated with Chapter 7 are typically discharged within three months but remain on your credit report for 10 years from the filing date.
- In a Chapter 13 bankruptcy, also known as an adjustment-of-debt plan, the debtor makes partial payments to creditors as part of a three- to five-year repayment plan. The bankruptcy is discharged after the completion of the plan. A Chapter 13 remains on your credit report for seven years from the filing date.
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Drawbacks: While the APR isnt super high for a bad-credit credit card, its still high enough to run up hefty interest charges. Youll want to pay the balance off as often as possible to avoid that extra expense. The card is not yet available in all states.
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Should You Get A Credit Card After Bankruptcy
Getting a credit card after bankruptcy can be a smart move, provided you can manage it responsibly.
The bankruptcy will have damaged your credit score, and making on-time credit card payments is one of the best ways to rebuild your creditworthiness. Before filling out a credit card application after your bankruptcy, though, consider why you got into financial trouble and if you can responsibly manage a new credit account.
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How And When Do I Pay Off The Card
You can pay off your Credit Builder charges in 3 ways:
Build Your Credit To Open More Options
In the era of smartphones and social media, every John and Jane on the street has a camera in their pockets and theyre not afraid to use them. Each embarrassing social stumble, short-sighted fashion choice, and inebriated mistake can live on forever on the world wide web.
Fortunately, the consumer credit world is a little more forgiving than your Facebook friends, and your financial mistakes will likely be forgiven years before you live down that publicly-posted reality show application video. In fact, negative marks on your credit report can only remain for seven years , after which time they no longer haunt your every credit application.
In the meantime, the absolute best thing you can do is to continue to pay down any existing debt and always pay on time. As your credit score improves so, too, will your credit options. With hard work and patience, you may one day find it easy to qualify for just about any credit card for excellent credit that catches your eye.
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The Type Of Bankruptcy Counts
There are two basic types of personal bankruptcies:
- Chapter 7. This is where all of your debts are eliminated and any assets you own not exempt will be sold off and used toward paying your debts. This will wipe out what you owe your creditors and anything you own of any value. Chapter 7 allows for a fresh start, as once the bankruptcy is discharged or completed youll no longer have any liability to creditors. Your credit score will be severely damaged.
- Chapter 13. With this type of bankruptcy, your debts are restructured, which means you and the creditors come to an agreement over how much of the debt you will repay within a time frame of three to five years. Any remaining portion of your debt is forgiven. Although this type of bankruptcy is less damaging to your credit, it still carries a strong negative effect.
How Do I Rebuild My Credit After Bankruptcy
There are no easy roads or secret tricks to rebuilding credit after bankruptcy. Post-bankruptcy, you are given a bit of a fresh start from past obligations to work on building credit back up.
The best way to rebuild your credit after bankruptcy is to focus on paying your monthly bills on time, every month. If you have a car loan or other installment loan, make sure that you are making those monthly payments each month.
Do your best to minimize signing up for new credit and focus on building up an emergency fund. Having an emergency fund to handle unexpected expenses is another good way to rebuild your finances.
One way to build savings and your credit history is through a . These are available through specialized online lenders or your local credit union.
Having a checking account or savings account can be another good step toward building credit history.
You may be anxious to get a new credit card as soon as possible, but most unsecured credit cards for poor credit come with significant upfront and ongoing fees. It may be better to wait and focus on getting a secured credit card that comes with lower or no fees.
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How To Get Approved For Credit Cards With Bad Credit
Theres no guaranteed method of receiving approval for a credit card, especially with bad credit. You can improve your odds of success by knowing where you stand and by only applying for a card thats both practical and attainable for your specific financial circumstanceseven if it means waiting longer to get a credit card.
Put some thought into deciding whether or not your situation lends itself to either a secured or an unsecured credit card and make sure to read the fine print of any plan you wish to apply for. Finally, dont be tempted to embellish or falsify any of the information you submit through an application, as its not worth the potential consequences.
Quick Tips To Effectively Use Credit Cards After Chapter 7 Bankruptcy
The simplest way to include good information in your credit reports each month is to pay your bills on time. And doing so is essential to dispelling the inaccurate information about bankruptcy. And, follow these suggestions while using the best credit cards to rebuild credit after chapter 7 bankruptcy.
Dont spend more: The cost of accruing credit card debt is high, and it puts extra strain on your budget. Additionally, your current objective should be to develop sustainable, responsible payment and spending habits. Therefore, always settle your account in full or refrain from using your card at all.
Create Your Emergency fund: If you have a significant unforeseen expense or interruption in your income, saving money for a rainy day will prevent you from ending yourself back where you started. So, set aside some money each month for this.
Avoid taking cash advances: It is quite expensive to use your credit card to get cash from an ATM because there is a fee and a very high interest rate that begins to accrue immediately away. Therefore, financial advances should only be used in dire circumstances. This is especially true if you have a secured card because paying finance fees to access money that you deposited actually makes no sense.
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Other Tips To Help Fix Your Credit After Bankruptcy
Heres some more advice on how to revive your credit score after bankruptcy:
- Avoid : Dont fall for con artists who claim they can remove a bankruptcy from your credit report. Nobody can remove bankruptcy from a credit report before the allotted 7-10 years have ended.
- Avoid frequent job changes, if possible: Your state of employment has no direct effect on your credit score, but lenders may put less faith in borrowers drifting from job to job.
- Keep account balances low: From where the credit bureaus stand, maxed out credit cards are a sign of strained finances. Aim to keep your credit utilization ratio below 30%. Also, keeping your balances low will lower your debt-to-income ratio , which in turn will amplify your shot at landing a low-cost loan.
- Not applying for new credit often: Lenders and credit bureaus take note when borrowers rapidly apply for credit. Its not a good look. It makes you look desperate, which makes you look risky. Remember, lenders abhor risk.
- Saving money: This one is less about restoring your credit score and more about making sure youre financially sound. If youre dealing with the consequences of bankruptcy, youre probably not in the best financial shape to handle surprise medical bills or unforeseen car troubles. Saving a little money from your paycheck every week can bridge the gap when you need it most. It doesnt take a fortune to mitigate misfortune. Three to six months worth of living expenses should do the trick.
Building Credit After Bankruptcy: Chapter 7 Vs Chapter 13 Bankruptcy
Most people file either Chapter 7 or Chapter 13 bankruptcy. In Chapter 7 cases, your debts will be discharged more quickly â usually in 4-6 months. In Chapter 13, your debts are reorganized into a 3-5 year repayment plan. After that time, your remaining debts are discharged. Because of these differences, building credit looks a little different after each type of bankruptcy.
Building Credit After a Chapter 7 Bankruptcy
Often, Chapter 7 bankruptcy filers improve their credit score considerably in the first year after their bankruptcy discharge. Youâll want to be proactive in rebuilding your credit in this first year and beyond. To do so:
Use one of the credit cards listed below.
Make on-time payments every month
Don’t use your entire available credit. Not using all your available credit lowers your credit utilization ratio, which improves your .
Using your credit cards responsibly will lead to credit line increases. With a higher credit limit, you can improve your credit score even more quickly by using the card more and not having any late payments. This will get you to the 680 credit score you need to get a good car loan.
Building Credit After a Chapter 13 Bankruptcy
Tips For Using Credit Cards After Bankruptcy
Improving your credit after bankruptcy may take some time. But with the right card and financial know-how, you can get the process started and with enough positive information added to your credit history over a long enough period of time, your credit scores should start to improve along with your credit rating .
Here are some pointers to keep in mind as you use credit cards after bankruptcy and focus on improving your credit health.
What Is The Easiest Credit Card To Get After Chapter 7
The most straightforward credit card to obtain after the bankruptcy is a secured one, by far. These cards are created especially for people who need to repair their credit. You should go for a Zolve credit builder card if you want to build your credit. It is among the simpler secured cards to obtain for folks who have recently gone bankrupt.
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What To Do After You Receive Your Credit Card
The tips below can help you to manage your credit card responsibly after youve been approved for a credit card:
- Make your repayments on time. Youll need to make all of your payments on time to build your credit score. It can help to set up automatic payments from your bank account or set up a monthly reminder on your phone to make sure you dont miss a payment.
- Pay your card in full each month. You can save money on interest and avoid your balance getting too big if you simply pay the amount you owe off every month. This can help you rebuild your credit and make sure you dont get sucked into another cycle of debt thats difficult to get out of.
- Avoid using your card for cash advances. Try not to take out cash advances using your credit card since these often come with higher interest rates and can be difficult to pay off. If you need emergency cash, you may be better off looking into a bad credit loan .
- Keep your card balance below 30% of your credit limit. Spend only a portion of your allowable credit limit each month to show the credit bureaus that youre in control of your spending. This can help to increase your credit score as well.
- Dont pay your credit card off with borrowed money. Avoid paying down your credit card debt with other forms of debt such as payday loans or cash advances from other credit cards. This is because your interest payments can quickly get out of hand, leading you to spiral into more unmanageable debt.
How Can I Get A High Limit Credit Card With Bad Credit
You may be able to find a secured credit card with a higher-than-average maximum deposit amount, but this will still be capped at the value of the collateral deposit, so its unlikely youll find one with a limit beyond a few thousand dollars. Unsecured cards geared toward subprime borrowers typically set credit limits low, as the issuer is looking to reduce risk by whatever means possible beyond collateral.
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Tips To Choose Best Credit Cards After Chapter 7 Bankruptcy
Here are some tips to choose the best credit card to apply for after chapter 7 bankruptcy:
- Make sure the card issuer reports your account details to each of the three major credit bureausExperian, TransUnion, and Equifaxwhich will give you a greater chance to raise all of your credit scores.
- Ideally, after a predetermined amount of time, your secured credit card will “convert” to an unsecured one. If you have paid your debt in full before it converts, you will receive your deposit back. You can continue to use the card to aid in establishing your credit history.
- You can receive alerts for significant changes to your credit report by registering for free, round-the-clock credit monitoring. This can let you respond swiftly to mistakes and fraud warning indicators. You can tell whether you’re prepared to apply for a credit card upgrade by keeping an eye on your credit score.
You should check your credit reports for inaccuracies and keep an eye on your credit score going forward in addition to following tips mentioned above. Choose the best credit cards to rebuild credit after chapter 7, Zolve Credit Builder Card can help you to start the process of rebuilding your credit. You certainly don’t want the issues that resulted in bankruptcy to come up again.