Can I Get Credit Cards After Bankruptcy Discharge
You can definitely apply for credit cards after bankruptcy discharge but you may be rejected if your bankruptcy still shows on your credit report. Until you can qualify for a regular credit card, you may want to apply for a secured credit card to build your credit while you spend money. This will make sure your credit score is in decent shape when your bankruptcy ends.
You may also want to consider rebuilding your credit without a credit card. For example, you could take out a or apply for a bad credit car loan to increase your credit score. You could then take out a Visa Debit or Debit Mastercard with your bank or sign up for a prepaid card to enjoy the convenience of a credit card without needing to qualify.
How Filing For Bankruptcy Can Help Your Credit Scores
Even if you have high credit scores, if you find yourself in a position where you must file bankruptcy, then your credit scores probably aren’t as important as the reasons for having to file bankruptcy. Getting a new loan or credit card is not as pressing as, for instance, a pending wage garnishment or mortgage foreclosure. Nevertheless, after you get bankruptcy relief, you might find that the bankruptcy could actually help your credit, even though the bankruptcy will remain on your credit report for up to ten years.
How Bankruptcy Can Make It Hard To Get More Credit
Some lenders will refuse your loan application as long as a bankruptcy appears on your credit report. Other lenders, typically those focused on subprime borrowers, may accept your loan application once your bankruptcy is several years oldbut you can expect them to charge steep interest rates and fees, and to offer relatively low loan amounts or borrowing limits.
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What Are Fico Scores
One of the leading purveyors of the credit score is a company called Fair Isaac. Scores calculated using formulas and algorithms developed by the Fair Isaac Company are called FICO scores. Fair Isaacs formula is proprietary, meaning that Fair Isaac owns the process and doesnt have to provide that formula to anyone. Because of this, sometimes it is difficult to explain or predict how the company calculates any particular credit score.
FICO credit scores range from as low as 300 to as high as 850. Most lending banks consider a credit score of 720 to be good.
The Fair Isaac Company uses the information contained in your credit report as the raw material for calculating the score. The three main credit reporting agencies, Equifax, Trans Union, and Experian, may not have the same information, and therefore, your credit score could differ from one agency to another. Usually, this difference is not more than a few points.
For Fair Isaac to calculate a credit score at all, you must have at least one account that has been open six months or longer, and at least one account that has been reported to the credit bureau within the last six months.
Fair Isaac uses various pieces of credit information, both negative and positive, to calculate your score. According to the companys own materials, here are the percentages that each type of information contributes to the overall score:
- Payment History: 35%
- Length of Credit History: 15%
- New Credit: 10%
- Types of Credit in Use: 10%
How Long Will Bankruptcy Affect My Credit File
Your bankruptcy will appear on your credit report for six years, or until you’re discharged if this takes longer. Lenders look at your credit profile when you apply for credit, so you’ll probably struggle to borrow money while bankrupt. Whatâs more, you must tell lenders about your bankruptcy when applying to borrow over £500. Employers and landlords may ask to look at your credit information before employing you or letting you rent property.
If you do find someone who’ll lend money to you, they may charge you a higher interest rate as they’ll see you as a high-risk customer. Even after your bankruptcy has been cleared from your profile, lenders can ask if youâve ever been bankrupt .
You can see what’s on your credit profile by getting your Experian Credit Report.
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How To Fix Your Credit After Bankruptcy
If you found yourself with so much debt that you were forced to file for bankruptcy protection, chances are youre wondering what comes next.
Well, the good thing is your debt should now be more manageable.
Depending upon the type of bankruptcy you filed, you probably now have a much better debt-to-income ratio as a result. This alone can make you a better risk to lenders, but lets not get ahead of ourselves.
A bankruptcy filing under Chapter 7 rules means assets are liquidated and dispersed to creditors. As a result, the debts are written off, although they will remain on your credit report for at least seven years.
If you filed for Chapter 13 protection, your debts are largely still in place, although they will be reduced to a manageable level.
As you know, you can only file for bankruptcy once in an eight-year period. This fact is what may make some creditors start courting you but resist the temptation.
This is your opportunity to get back on the right financial track.
To help you in this effort, here are things you should and shouldnt do as you get back on your feet.
What Bankruptcy Will Affect While On Your Credit Score
Your payment history, on-time payments, and recent credit reporting can all affect how lenders work with you.
Once you file bankruptcy and businesses see your credit report’s negative information, you may have concerns about:
- Getting a car loan
- Getting loans without a qualified co-signer
- Adding authorized users to some credit cards
- Security deposits and returns of safety deposits
You have options regarding all these concerns if you are having credit or debt issues. There are ways to address each concern by yourself or with professional help. Getting a fresh start is possible, especially after filing bankruptcy.
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Dont Close The Accounts:
It may seem like a good idea for you to stay off of the credit cards, but this will damage your credit score further. When you are closing a credit card, you will be reducing the amount of credit that is available to you and it further decreases your credit score. It is best to keep all the credit lines open and if you believe that you will spend on your credit card, cut it off and choose a credit card that will not charge you a high annual fee and keep paying it to retain the credit that is available to you.
Dont lose your patience, it took time for you to reach bankruptcy and it will take time for you to recover from it. Take loans that are easy to obtain. Make all the payments on time. Utilise low credit and dont close a line of credit as it will reduce the amount of credit that is available to you. Keep a close eye on your CIBIL report annually for the errors and inconsistencies. When you are bankrupt, it is the best time for you to start an emergency fund to rely on as you will not have any debt. Take a car loan so that it helps you improve your credit and it will also be a part of an investment. Learn from your previous mistakes and avoid it.
When Bankruptcy Is The Best Option
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Bankruptcy isnt the end of the world. It may even be good for you.
Bankruptcy stops collection calls, lawsuits and wage garnishments. It erases debt. And despite what youve heard, bankruptcy may help your credit scores.
But thats not the whole story. Most people struggle so long with their debt that their credit is already battered by the time they file for bankruptcy. And once they do, their scores typically rise, not fall. If the debt is erased which is known in bankruptcy court as a discharge scores go up even more.
Within a year, youre way better off, says Jaromir Nosal, assistant professor of economics at Boston College, who co-authored a study for the Federal Reserve Bank of New York about the effects of bankruptcy. Its a pretty rapid rate of recovery.
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Debt Settlement Credit Score Impact
Debt settlement will be on your credit report for seven years and definitely impact your ability to get a loan and the interest rate you pay, if you are approved.
Debt settlement typically requires that you make a lump-sum payment to clear your account. Its generally advised that you stop making monthly minimum payments until youve negotiated a settlement plan, as creditors will be more inclined to negotiate with you if theyre no longer receiving any payments on your debt. But stopping payment can further damage your and expose you to late fees, additional interest charges, collection efforts and lawsuits.
The possible advantage to settlement is that in exchange for a payment, creditors will sometimes agree to report the settlement as paid as agreed, which means your score wont get hit with negative points like it would if it were reported as just settled. Not all creditors report information to the three credit reporting bureaus so its possible, though not probable, that your settlement may not get reported.
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Updated by Amy Loftsgordon, Attorney
A “” is a number that supposedly summarizes your credit history and predicts the likelihood that you’ll default on a debt. Lenders use credit scores to decide whether to grant a loan and at what interest rate.
FICO scores, the most common type of credit scores, range from 300 to 850. A FICO score is based on the information in your credit report, including:
- your debt payment history
- how much debt you currently have
- your different types of credit
- how long you’ve had credit, and
- whether you have new credit.
A high FICO score generally means that you’re good at managing your finances, while a low FICO score usually means that you have been delinquent with credit payments, have high unpaid debt balances, gone through a foreclosure, filed for bankruptcy, or experienced other problems repaying debt.
If you’re struggling financially, bankruptcy can help. Bankruptcy laws were enacted to provide debtors with relief from their creditors by giving them a fresh start. This fresh start usually comes with a high price, namely, a major hit to your credit. But bankruptcy can actually help your credit in the short and long term. How much it will hurt or help you depends on your credit scores before you file , your financial circumstances, and other factors.
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Bottom Line: Bankruptcy And Credit
I have personally seen the impact of the bankruptcy petition on some debtors five to seven years later and most are doing fine, says Arnold Hernandez, an attorney in Tustin, Calif., who handles bankruptcy cases. Bankruptcy is not forever.
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What Are The Best Debt Relief Companies
- CuraDette. CuraDebt is a leading US consultancy providing debt consolidation, debt settlement and tax relief.
- Elimination of the national debt. National debt relief has the highest average debt reduction rates, accounting for over 30% of total debt.
- Recognized debt relief.
- Excellent debt assistance.
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Once You Receive Your New Card
After you receive your new card, pay it off in full each month, if possible, or at the very least, make the minimum payment. This gets reported to the credit bureau and will help establish a positive credit report that will begin to increase your overall credit score. If you are late with a payment or miss a payment altogether, however, that will also be reported to the credit bureau and will negatively affect your credit score.
Building Credit After Chapter 7 Bankruptcy
Most can rebuild their credit rating and have a better score than ever within 1 – 2 years after they file Chapter 7 bankruptcy. But, you canât take this for granted. To get the full benefit of your bankruptcy filing, youâll have to make an effort to improve your credit score.
Getting new credit after filing bankruptcy â itâs easier than you might think!
One of the biggest surprises for many bankruptcy filers is the amount of car loan and credit card offers they receive – often within a couple of weeks of filing their case. Itâs a lot! Why?
Filing Chapter 7 bankruptcy makes you a low credit risk
The Bankruptcy Code limits how often someone can file a bankruptcy. Once you get a Chapter 7 bankruptcy discharge, youâre not able to get another one for 8 years. Banks, credit card issuers, and other lenders know this.
They also know that, with the possible exception of your student loans, you have no unsecured debts and no monthly debt payment obligations. This tells them that you can use all of your disposable income to make monthly payments.
Beware of high interest rates.
Pay close attention to the interest rates in the new credit offers you receive. Credit card companies and car loan lenders have the upper hand here. They know you want to build your credit rating back to an excellent FICO score. And they know that youâll be willing to pay a higher interest rate than someone with perfect credit and no bankruptcy on their record.
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Impact Of Bankruptcy And Debt Settlement On Credit
Both bankruptcy and debt settlement can reduce your creditworthiness and lower your credit, or FICO, score for years. Debt Settlement will stay on your credit report for seven years. Bankruptcy, no matter which chapter you file under, is certain to bring down your score. The higher your score is to begin with, the more it will drop.
Consider Bankruptcy Your Last Option
Bankruptcy is the most drastic approach to address your financial problems. While its not the worst option, it should be your last option and only if your situation is dire.
If you dont see any other way out of your financial problems, filing bankruptcy will protect you from your creditors and give you a chance to get out from under some of the immediate financial pressure. You may face credit score consequences when you file for bankruptcy protection, but those are outweighed by the ability to hit the reset button on your finances.
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Who Creates Your Credit Report And Credit Score
There are two main credit bureaus in Canada:
These are private companies that collect, store and share information about how you use credit.
Equifax and TransUnion only collect information from creditors about your financial experiences in Canada.
Some financial institutions may be willing to recognize a credit history outside Canada if you ask them. This may involve extra steps. For example, you may request a copy of your credit report in the other country and meet with your local branch officer.
What Is The Difference Between Default And Bankruptcy
Defaulting on a loan means that youve violated the promissory or cardholder agreement with the lender to make payments on time. Each lender has its own requirements surrounding how many missed payments you can have before it considers you in default. In some cases, that may be as little as one missed payment or it can be as many as nine missed payments.
Filing for bankruptcy, on the other hand, is a legal process that involves listing out your debts and assets and finding a way to resolve the debts. A judge will decide if any of your debts can be discharged and if your assets will be used to pay off the outstanding balance. The judge will also decide which assets youre allowed to keep and which can be taken from you.
Default and bankruptcy usually go hand in hand. Many borrowers default on their loans and then subsequently file for bankruptcy.
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How Long Does Negative Information Stay On Your Credit Report
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The length of time negative information can remain on your credit report is governed by a federal law known as the Fair Credit Reporting Act . Most negative information must be taken off after seven years. Some, such as a bankruptcy, remains for up to 10 years. When it comes to the specifics of derogatory credit information, the law and time limits are more nuanced. Following are eight types of negative information and how you might be able to avoid any damage each might cause.
Contact Luftman Heck & Associates Today
The Cleveland bankruptcy attorneys of Luftman, Heck & Associates are committed to helping you and your family rebuild your financial health so that you can enjoy a happier, stress-free future. If youd like more details on how you can rebuild your credit or have any questions related to bankruptcy, we encourage you to call us at , or contact us online for a free consultation.
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