Filing bankruptcy wipes away your debts, giving you a chance to start over. It is often the last resort when you’ve tried all you can to pay off your debts. Due to the severe effect on a credit report, people often avoid filing bankruptcy. However, getting a credit card after filing bankruptcy is still possible.
You’ll want to start over as soon as you’re ready, so you can begin rebuilding your credit. Creditors have different rules for approving credit cards for people with a past bankruptcy. If you had a high credit score when you filed bankruptcy, your credit score may drop several hundred points once the bankruptcy hits your credit report; but if you already had a low credit score prior to filing bankruptcy, your credit score may not drop as much. Here’s how you can go about getting a credit card after filing bankruptcy.
Know When You’re Ready for a Credit Card
Before you apply for a credit card, make sure you’re ready for the responsibility. Normally, bankruptcy will go on your credit report and will stay for 7 to 10 years, depending on the type of bankruptcy you filed. And during this period, you won’t be able to file bankruptcy again for several years. So, if you get into credit card debt again, bankruptcy won’t be an option for relief. Make sure you’ve corrected the bad spending habits that got you into debt; or that you now have a stable source of income. When you get a credit card again, you need to be disciplined enough to charge only what you can afford on your credit cards and pay your balance in full each month.
Check Your Mailbox for Credit Card Offers | Getting A Credit Card After Filing Bankruptcy
Checking your mailbox is one of the simplest ways to get a credit card after bankruptcy. Some credit cards issuers, knowing you can’t file bankruptcy again for several years, will send offers for their credit cards. These credit card offers are some of your best chances of getting approved.
If you previously opted-out of receiving pre-approved credit card offers, credit card issuers won’t send you any offers because you’ve instructed them not to. You’ll have to opt-in again by going to OptOutPrescreen.com to start receiving offers from credit card companies.
Note that pre-approved credit card offers don’t necessarily guarantee approval. You’ll still have to apply and go through the application approval process. If you’re denied, the credit card issuer will send a letter letting you know the reasons your application was turned down.
Adjust Your Expectations | Getting A Credit Card After Filing Bankruptcy
Don’t expect your first post-bankruptcy credit card, or maybe your first few credit cards after bankruptcy, to have great terms. Credit cards with rewards and low-interest rates are reserved for consumers with excellent and good credit scores. If you’re diligent about rebuilding your credit, you’ll qualify for these types of credit cards eventually, but you’ll have to prove your creditworthiness first.
Avoid applying for cards you included in your bankruptcy. These companies are more likely to deny your credit card application. Make sure the card you choose reports to at least one of the three major credit bureaus, preferably all three. You want your credit card usage to go on your credit report so that you can begin demonstrating good credit habits.
Consider a Secured Credit Card
One of your credit card option after filing bankruptcy is a Secured Card. A secured credit card requires you to make a deposit against the credit limit. You’re more likely to get approved for a secured credit card because it’s less risky for the credit card issuer. Some secured credit cards may not approve you if you had a bankruptcy discharged within the past one or two years; read through the qualification criteria for any secured credit cards you’re considering to see if bankruptcy will prevent you from being approved. Here are a few secured credit cards to consider:
- Capital One Secured MasterCard
- Discover it Secured Card
- Wells Fargo Secured Visa Credit Card
- U.S. Bank Secured Visa Card
Your credit limit will be equal to your security deposit, so pay as much as you can for a credit limit. After several months of keeping your secured credit card in good standing, you may be able to convert your card to an unsecured credit card. Also, other credit card issuers may be more willing to approve you for an unsecured credit card.
Retail Credit Cards May Be Another Good Option
Retail credit cards – those offered by stores you shop – often have less strict approval criteria for applicants. You may have a chance to be approved for one of these credit cards. You’re more likely to be approved for a closed loop retail credit card, which is one that doesn’t have a Visa or MasterCard logo and can only be used in the retail store.
Know Which Credit Cards to Avoid
Many of the credit cards offered to applicants who recently filed bankruptcy have high-interest rates and fees. Even though you’re trying to get back on track, that doesn’t mean you should accept just any credit card that will approve you.
Avoid any credit card with an extremely high-interest rate or that charges high upfront fees. These credit cards aren’t the best option for starting over as they put you into debt before you ever receive the card in the mail. If, as a last resort, you choose one of the cards, pay off the fee right away before your statement ever arrives in the mail and pay your balance in full every month to avoid expensive interest charges. Thiis will not only help you avoid getting into debt again, with time you’ll improve your credit score.