What Is A Good Credit Score
So, what is a good credit score, anyway? In Canada, its generally anything over 700.
It wont surprise you to hear that it does get more complicated than that. But if your score is above 700, then youre in reasonably good shape. Credit scores in Canada generally range from 300 to 900, and the jump from a fair score to a good score is right around that 700 mark, depending on company that does the scoring and the bank thats using the score.
Now, lets taking a closer look at how credit scores work and why theyre important.
How Does Bankruptcy Affect Your Credit Rating
Bankruptcy is likely to drop your credit score to the lowest possible rating at most Canadian credit bureaus. That means lenders, insurers, landlords, employers, and utility companies are less likely to extend you credit upon completion of your bankruptcy, but there are ways to rebuild your credit. To learn more about rebuilding your credit, please see .
Why Get A Credit Card After Bankruptcy
Although it may seem counterintuitive, applying for a credit card after bankruptcy can be a good move. If you use a credit card responsibly, you can rebuild your credit profile. To ensure you are using it responsibly, you must pay it off in full each month and do your best to avoid charging more than 10 to 30 percent of your credit limit. By following these tips, you can show that you are a safe credit risk and enjoy an increased credit score as a result.
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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
Comparing The Best Credit Cards After Bankruptcy: Annual Fee
Of our three chosen cards, only the OpenSky® Secured Visa® Credit Card requires users to pay an annual fee of $35.
This is relatively low compared to non-secured credit cards, which can charge anywhere from $95 to over $500 for their annual fee. However, if you are annual-fee-averse, you may want to stick with the other cards on this list.
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Other Factors That Affect Your Credit Card Application
- Income requirements. Most credit card companies specify the minimum annual income youll need to make to apply for a credit card. You may not be able to qualify for more premium credit cards with a lower income, while most basic credit cards require you to make at least $12,000 per year.
- Employment status. You may be required to show proof of employment to qualify for some after bankruptcy credit cards. In this case, you could show letters of reference from employers or pay stubs. Many credit card companies wont approve applications from people who dont have secure employment, even with a decent credit score.
- Other financial information. Each credit card issuer will have its own process to evaluate the risks involved in lending to you. Your bankruptcy will certainly be assessed along with your history of missed payments. Your provider may also ask for information about your current debts or assets.
What Types Of Financial Products Can Help Me Rebuild My Credit After Bankruptcy
The most important thing after bankruptcy is taking the right measures to improve your credit history. Only apply for a product when youre confident youll meet the eligibility requirements and can manage the account responsibly. Remember that it could take some time before a lender is willing to approve your credit application after bankruptcy.
Some different types of credit that can help improve your creditworthiness after bankruptcy include:
When using new credit accounts after going through bankruptcy, its essential that you confirm with the lender that it reports your activity to the two credit bureaus: Equifax and TransUnion. On top of that, make sure payments are being made on time and that youre keeping your credit utilization ratio well under 30% to ensure your credit score doesnt get damaged.
You can build your credit as an authorized user on another persons credit card account. As an authorized user, you can use the account freely, but wont be directly responsible for making payments to the lender. The account owner is essentially trusting that youll use the credit card responsibly while you piggyback off of their good credit to build up yours.
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Check Your Credit Report
If you are trying to rebuild your credit after bankruptcy, it is a good idea to start by reviewing your credit report. AnnualCreditReport.com provides all customers with a free copy of their credit report.
Normally, reports are provided only once per year. However, in the wake of the Covid-19 outbreak, customers may be able to receive free weekly reports up until April 20, 2022.
Knowing what factors affect your credit score can help you make better decisions and gain insight into why your score has been rising. It will also help you identify errors that could lower your score such as incorrect account information, public records, or other misinformation.
Your credit report can also be used to help ensure your bankruptcy is removed as quickly as possible. This happens after seven years for Chapter 13 bankruptcy filings and ten years for Chapter 7.
How Can Bankruptcy Help My Credit Score
If you find yourself in a situation where you need to file for bankruptcy, your credit score is less significant than the grounds for filing. A looming paycheck garnishment or mortgage foreclosure is more urgent than getting a new loan or credit card. However, once youve been granted bankruptcy relief, you could discover that the bankruptcy really helps your credit. Even though your bankruptcy will appear on your credit report for up to 10 years, this is true. In fact, bankruptcy has both short-term and long-term positive effects on your credit. We list these below.
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Become An Authorized Account User
To become an authorized account user, have a close friend or relative add you to their credit card account. Youre not responsible for repaying any of the money charged to the account. If the account is maintained responsibly, you will get positive marks on your credit report.
On the flip side, if he or she racks up unpaid bills, your score will reflect that. So, choose someone you would trust to make good financial decisions.
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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How A Secured Credit Card Works
A secured credit card company will require you to send them a cheque or money order of at least $500 along with an application form. Once approved, you will receive your credit card in the mail. There are some set up fees and monthly service fees, and a moderate to high interest rate on balances, but those are charged directly to your new credit card. You can then use your new secured credit card as you would a normal credit card. When the bill comes in, you pay the balance, or at least the minimum payment. That gets reported to the credit bureau and will help rebuild your credit profile and increase your credit score just as if you had been using a regular unsecured credit card! Of course, if you are late or miss payment, that also gets reported to the credit bureaus and hurts your chances of recovery.
A Question From A Debtcom Reader
Question: Im in the process of declaring bankruptcy. I actually consulted Debt.com and got hooked up with a company thats helping me.
Im relieved, because I was so far in debt after a motorcycle accident. Actually, I was in trouble even before. I already owed $9,000 on my credit cards and was a year from paying off the bike when I ran up big medical bills and couldnt work.
If Ive learned anything from this awful experience, its to be smarter about my money. Ive already been told my credit score is going to take a big hit, so how do I rebuild my credit? More importantly, how do I get a credit card back so I can not only rebuild my credit but also just live?
Ivan in California
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Alternatives To Secured Credit Cards
Unsecured cards for bad credit
Several issuers specialize in unsecured credit cards for people with bad credit, but NerdWalletgenerally doesn’t recommend them. That’s because these “subprime specialist” cards tend to charge high fees that can easily add up to much more than a typical minimum security deposit annual fees up to $99, application fees, “activation” and “processing” fees, monthly maintenance fees and so on. And unlike the deposit on a secured card, those fees are money you can’t get back. Our roundup of the best and worst cards for bad credit has more information on cards to avoid.
Prepaid debit cards
Prepaid debit cards offer convenience and are a safer alternative than carrying cash, but they don’t help you build credit. With a prepaid debit card, you “load” money onto the card, and the purchases you make are paid for with that money. Since you’re not borrowing money, there’s no effect on your credit score. See NerdWallet’s best prepaid cards.
Offered mostly by smaller financial institutions, such as credit unions and community banks, these loans are designed to help you build a good payment history. The money you “borrow” isn’t actually given directly to you. Instead, it’s held on your behalf in a savings account while you repay the loan in monthly installments. Once you’re done, the money is released to you and your credit report shows a paid-off loan. Learn more about credit-builder loans.
You Can Get A Credit Card After Bankruptcy
While some credit cards are harder to qualify for than others , not all hope is lost when it comes to applying for new cards after bankruptcy. When it comes to rebuilding credit after bankruptcy, consider the cards above as building blocks to improving your financial future.
Survey Methodology: CardRatings commissioned Op4G in September and October 2021 to conduct surveys among 1,524 cardholders nationwide. CardRatings website analytics from Jan. 1, 2021-Aug. 31, 2021 were used to determine a selection of the most popular cards and additional cards were included to add survey breadth. Responses to each of nine questions were given on a scale of 1-10 and respondents’ scores were then averaged under broad topics. To determine the overall score, responses from questions 1-8 were summed and the answer to “How likely are you to recommend this card to a friend, coworker or family member?” was double weighted. “Current Scores” reflect scores from the most recent survey “Past Scores ” are the scores averaged over each prior year the card has been surveyed. “Past Scores” indicates a card has only been surveyed in one prior year.
This content is not provided by any company mentioned in this article. Any opinions, analyses, reviews or recommendations expressed here are those of the authors alone, and have not been reviewed, approved or otherwise endorsed by any such company. CardRatings.com does not review every company or every offer available on the market.
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Best Credit Cards After Bankruptcy
Many or all of the products here are from our partners that pay us a commission. Its how we make money. But our editorial integrity ensures our experts opinions arent influenced by compensation. Terms may apply to offers listed on this page.
When you’re recovering after filing bankruptcy, opening a credit card is an important part of rebuilding your credit. The best credit cards after bankruptcy are easy to get, keep fees to a minimum, and report monthly activity to the major credit bureaus.
Although there are many credit cards available to consumers who have filed bankruptcy, good options that don’t bury you in fees are hard to find. We’ve compared bankruptcy credit card options to find the best ones.
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.
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Apply For A Loan With A Co
Should you apply for a loan on your own, lenders might deem you risky because of your credit past. Getting a co-signer on a loan can help boost your chances of getting approved. Thats because lenders will take into account the co-signers credit score, which would up your creditworthiness. When someone cosigns a loan, they dont have access to the money. However, they are on the hook for repayment should you be unable to keep up with your payments.
Why this matters: Rebuilding credit after youve filed bankruptcy can help you re-establish your credit profile. By understanding the different options, youll learn how these different forms of credit might help you boost your credit after its been on shaky ground.
How to get started: Explore the different options for establishing a new line of credit and see which ones you think might be beneficial for you. Youll want to take into consideration whether a hard pull or soft pull on your credit is required, what you would use that line of credit for, setting limits on a line of credit, and having a repayment plan in tact so you dont fall into a deeper debt hole.
What Are The Different Types Of Bankruptcy And How Is Each Considered By My Fico Score
A bankruptcy will always be considered a very negative event by your FICO Score. How much of an impact it will have on your score will depend on your entire credit profile. There are a few types of bankruptcies and how long they stay on your credit report is different.
Someone that had spotless credit and a very high FICO Score could expect a huge drop in their score. On the other hand, someone with many negative items already listed on their credit report might only see a modest drop in their score. Another thing to note is that the more accounts included in the bankruptcy filing, the more of an impact on your score.
As long as the bankruptcy is listed on your credit report, it will be factored into your score. However, as time passes, the negative impact of the bankruptcy will lessen. Typically, here is how long you can expect bankruptcies to remain on your credit report :
- Chapter 7 and 11 bankruptcies up to 10 years.
Chapter 7 bankruptcy is often called liquidation bankruptcy as it discharges most unsecured debt including personal loans and credit cards. When filing Chapter 7 bankruptcy, you can keep most of your assets and the process takes about 3-4 months.
Chapter 11 bankruptcies are filed usually by large businesses.
- Chapter 13 bankruptcies up to 7 years.
Deciding to declare bankruptcy is a hard decision, but there is a community of people who have gone through it. Check out the myFICO Forums to discuss your situation.
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Best For Military Members And Their Families: Navy Federal Credit Union Nrewards Secured Credit Card
Heres why: Military members, veterans and their families emerging from a bankruptcy can take advantage of the cards low variable APR on purchases and balance transfers, plus a few bells and whistles that elevate this card above the rest.
Heres an important note before we get into the benefits the eligibility requirements to apply for nRewards® Secured Credit Card are strict. Youll need to be a member of Navy Federal Credit Union, which is open to all branches of the U.S. armed forces, veterans, Department of Defense officials and their families.
Cardholders earn one point per $1 spent on purchases. Points can be redeemed for cash back, statement credits, gift cards and merchandise. There are no annual fees or foreign transaction fees, too. Plus cell phone protection and a rental car collision damage waiver also come standard.
After six months, Navy Federal will review your account activity and may upgrade you to an unsecured credit card and return your deposit.
Learn more about the best credit cards for active-duty military personnel.