One Response To Credit Card Application After Consumer Proposal
, A licensed trustee said:
If at least 3 months have passed since you filed your proposal, you may apply for a secured credit card. There are a couple of ways to do this.
Most CDN banks offer the service, but dont advertise it you need to speak with a loans officer at whichever bank you deal with. Theyll get you to place $500 or a $1,000 in a savings account which they will then freeze. They will then issue you a credit card with the same limit. As long as you make your payments on the card your deposit just sits there. If you miss a payment the bank will apply your deposit and then cancel the card.
The second way is to apply to a US based credit card company. They charge a one-time insurance fee, for example to get a $300 limit card you might pay a one-time up front fee of $200. The higher the limit you request the higher the fee payment.
Finally, stay away from the prepaid cards these do not rebuild your credit at all, they simply look like a credit card.
Youll Only Be Eligible For Certain Cards
Filing for bankruptcy, regardless of which type and the circumstances, will have a lasting impact on your credit score. And, a bankruptcy will show on your credit report for a significant amount of time. A Chapter 7 bankruptcy will stay on your credit report for 10 years and a Chapter 13 will stay on your report for up to seven years.
With a less-than-stellar credit score, responsible use of a credit card can help rebuild your score. But it may seem like a Catch-22 since you wont qualify for many cards like those offering rich rewards or premium perks.
The best move is to apply for a card designed for someone looking to build their credit. A secured card is an ideal card for this purpose and even with a fresh bankruptcy you may be able to get approved. With a secured card, the credit limit you receive is typically equal to the amount of the security deposit you put down.
There are also a handful of unsecured cards that wont check your credit score or are willing to extend a line of credit even to someone with a blemished credit history. These cards typically come laden with fees and sky-high rates. Secured cards tend to have lower costs.
Keep Up Payments With New Credit Cards
Payment history is the most important factor that impacts your credit score. Its crucial, especially after bankruptcy, to make timely payments once you have new credit.
You can stay on top of your payments by:
- Enrolling in autopay
- Paying off your card multiple times a month
- Setting reminders to make payments
- Arranging your personal finances to help you pay off the full balance each month
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Returning To Good Credit After Bankruptcy
A personal bankruptcy filing will affect your credit report for a certain amount of time depending on how you file:
- Chapter 13 bankruptcy stays on your credit report for 7 years after final discharge
- Chapter 7 bankruptcy stays on your credit report for 10 years after final discharge
Having a bankruptcy on your record for 7-10 years does not mean it will take you this long to repair your credit score or get out of debt.
Right away, the “final discharge” releases you from personal liability in most debts. You need this bankruptcy discharge before you can take steps to build toward better credit, otherwise, you will continue to have large debts.
Once the process starts, you can decide what choices to make to rebuild your credit.
Correct Any Errors On Your Credit Report
Your new credit report should show that you have no debts and that you have obtained your final discharge from bankruptcy. If the credit report is not correct, identify the errors and notify the credit bureaus immediately. In most cases, you can fill out a form provided by the bureau. You may have to provide documentation as evidence that you have received your final discharge from bankruptcy.
Usually within 30 days of filing your notice of errors to the credit bureau, they will send you a written response outlining what action they have taken to correct the errors or confirm that the information they have is correct.
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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.
Beware Credit Card Fees Use New Credit Wisely
After bankruptcy, some companies attempt to charge stunningly high fees for secured cards, sometimes as high as $200 for a $500 card. Talk about adding insult to injury.
However, you have choices. Shop for a low- or zero-fee card, study the fine print, and make the choice best for you. Be on the lookout for interest rates on balances carried over.
Also, make certain your new card company reports to all three credit monitoring agencies. Some dont, and youll want the world to see how exceptionally well post-bankruptcy you is performing.
Once youve secured a secured credit card, you will demonstrate that excellent performance by using the card prudently, never going above 30% of the balance limit, and paying off the balance each month.
When you are comfortable paying off the secured credit card, you might be ready to try for an unsecured card. Once again, anticipate rejection, high fees, or punishing interest rates.
However, given sufficient time and diligence using your secured card balances kept low and paid off each month you should be able to obtain a regular, unsecured credit card one even with rewards or cash back.
But the rules do not change: When you do get an unsecured credit card, keep the balances low and paid off on time monthly.
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How Soon Will My Credit Score Improve After Bankruptcy
By FindLaw Staff | Reviewed by Bridget Molitor, JD | Last updated June 30, 2021
You can typically work to improve your credit score over 12-18 months after bankruptcy. Most people will see some improvement after one year if they take the right steps. You can’t remove bankruptcy from your credit report unless it is there in error.
Over this 12-18 month timeframe, your FICO credit report can go from bad credit back to the fair range if you work to rebuild your credit. Achieving a good , very good , or excellent credit score will take much longer.
Many people are afraid of what bankruptcy will do to their credit score. Bankruptcy does hurt credit scores for a time, but so does accumulating debt. In fact, for many, bankruptcy is the only way they can become debt free and allow their credit score to improve. If you are ready to file for bankruptcy, contact a lawyer near you.
Your Bankruptcy Has To Be Discharged Before You Can Apply
You cannot apply for any new lines of creditincluding a credit cardwhile your bankruptcy proceedings are in progress without court approval. The amount of time it takes to settle and complete your bankruptcy proceedings will determine when you can apply for a credit card.
A Chapter 7 bankruptcy takes approximately four to six months after the initial filing to be completed and your debts discharged. After that, you can apply for a credit card.
A Chapter 13 bankruptcy, however, can take between three to five years as its a restructuring of your debt that you pay off over time. Only after youve made your last payment will your bankruptcy be discharged. Until then, youll have to wait that entire period of time before applying for a credit card.
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Evaluating Credit Card Offers
You will typically begin to receive new offers for credit after bankruptcy. However, be aware that many new credit card offers will have low limits, high-interest rates, and high annual fees. Reviewing the offer terms carefully before signing up for a new credit card after bankruptcy is essential. The goal is to accept a credit card with the highest possible limit because credit reporting agencies rate you based on your total available credit. Not only can lower limits can harm your score, but you’ll want to pay off the majority of your balance each month.
If you don’t qualify for a typical, unsecured credit card, you might want to start rebuilding your credit by getting a secured credit card from your bank. You’ll deposit a certain amount of money in the bank as collateral for the card. In exchange, you have a line of credit equal to the amount in the account. A secured credit card rebuilds credit because the creditor typically reports payments on your credit reportyou’ll want to be sure that will happen.
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How To Get A Credit Card After Bankruptcy
While there are no special steps you have to take to apply for credit cards after a bankruptcy, it helps to be strategic about which cards you target. Not only is it tough to find a fit with a bankruptcy on your credit report, but each application also results in a hard pull of your credit report, which will only hurt your already damaged score.
Because of this, when youre searching for a bankruptcy-friendly credit card, youre best off sticking to cards designed for people with bad credit. These cards tend to have good approval odds and often include features that can help you control your spending while you monitor and rebuild your credit.
Here are a few things to look out for when choosing a post-bankruptcy credit card:
Getting A Credit Card During Bankruptcy
During your bankruptcy, it is an offence under the Bankruptcy and Insolvency Act to apply for credit without disclosing the fact that you are an undischarged bankrupt or in a consumer proposal. This means you will not likely be approved for a regular credit card during your bankruptcy or proposal.
We know that it is difficult to function without a credit card, particularly during a proposal which can last for a longer period of time. Try making a hotel reservation or buying an airline ticket without having a credit card and youll know what I mean. However you do have options for surviving without a credit card.
One option is to apply for a secured credit card. For example, Home Trust Secured VISA allows you to obtain a card with limits between $500 and $10,000. You must put down a security deposit for the amount of your limit in full. Each month, you pay off your balance in full, and the transaction is reported to the credit bureau, thereby re-establishing your credit. It is important to note that if you are currently bankrupt or in a proposal you must disclose this in the application.
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Need Assistance From Nonprofit Agencies And Regional Causes
Some not-for-profit corporations and regional causes might let individuals that posses recorded personal bankruptcy and are generally fighting economically. Capable provide complimentary monetary assistance such providing food, tools, and also purchasing their lease. If a neighborhood non-profit charity will be able to help you along, you are able to abstain from taking out fully another finance.
Want Paying Plug-ins
Just be sure to negotiate together with your costs vendor and describe your current financial predicament in their mind. If they are recognizing, they might supply an extended repayment plan.
Obtain a Payroll Move Forward
In the event you an employee and you also want short-term financing, you could pose a question to your manager to give you an advance your earnings. In the event your manager happens to be being familiar with, they can enable you to avoid another financing.
Make Sure You Use But Dont Overuse Your Secured Credit Cards
To gain any benefit from secured credit cards, or any credit cards for that matter, you need to actually use them. The optimal way to do this would be to charge a small amount, wait for the monthly statement and then pay on or preferably before the due date. This way, it will demonstrate that you can handle your credit responsibly.
Make sure not to charge too much. Although some experts will say to charge no more than 5% of your available balance, a commonly acceptable amount is 20% to 30%. Some would even suggest up to 50% but thats getting a bit too high. So now youre probably asking, does this mean if I send in a $1000 deposit, I should not have a balance of any more than $200 or $300 at any given time? YES! Thats exactly right. Theres nothing worse than charging $950 on a card with a $1000 limit. Or worse yet, maxing it out and making it go over the limit with the interest charges. This will report to the credit bureaus and lower your score because it looks like youre short on cash or in financial trouble especially if its like that every month.
Remember not to charge more than 20% to 30% of your available credit limit. Charge your cell phone bill, Internet bill or hydro bill to your secured card. In fact, set up automatic payments so that you never have to worry about late payments again! If you dont have any bills to charge to your secured credit card, use it to pay for gas for your car or routine purchases.
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Do You Have To List All Credit Cards In Your Bankruptcy Papers
As discussed, you have to disclose all of your debts on your bankruptcy papers. This includes all credit cards with a balance. However, if you don’t have a balance on a credit card, it is technically not a debt. This means that you don’t have to list credit cards with a zero balance.
If a credit card is not listed in your bankruptcy, your lender will not receive notice of your bankruptcy through the court. However, your bankruptcy filing is a public record and the information is reported to credit reporting agencies. This means that even if you don’t list a credit card company in your bankruptcy, the company will most likely find out about your bankruptcy.
The Best Airline Credit Card For People With Bad Credit
Just because you’re limited to secured credit cards doesn’t mean you can’t still earn free flights. The AeroMexico Visa Secured Card offers people with poor credit double miles on certain purchases, a 3,500-mile bonus for opening and using your account, and a complimentary companion certificate for a free flight.
Unlike the other cards on this list, the AeroMexico Visa Secured Card does come with an annual fee of $25, but that low fee is more than covered by the companion pass. Currently, flights from New York City to Cozumel, Mexico, range from $350 to $650, meaning your card could save you upwards of $625 without other rewards included.
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Dont Believe Everything You Hear From Bank & Other Employees In The Credit World
Some employees dont like to look stupid, so if they dont know an answer, they make it up as long as it sounds logical. Or worse yet, they state opinion as fact. Theyll sound believable because they are the person in authority that you are looking up to. Unless you can get something in writing, dont believe it. Just ask them to put it in writing and youll see them back peddle! As the saying goes, trust, but verify. If you cant get the answer you want, keep asking different people until you get the same answer at least three times. You will encounter other employees who dont want to risk giving a wrong answer. Either because they truly dont know, or because theyd rather play it safe, theyll tell you there is absolutely no way to guarantee you that youll be approved. You just need to apply and then youll find out. Of course I wouldnt expect anyone to give me a 100% guarantee that Ill be approved without doing a credit inquiry. But some people dont realize, or care, that credit inquiries lower your score and stay there for three years. I just tell them that I will only apply if it seems fairly certain that I would be approved.