How to Get a Credit Card After Bankruptcy
If, by some hapless flow of financial circumstances, you have found yourself compelled to file for bankruptcy, it is important to gradually rebuild your credit history
and establish a positive credit score. Living on a cash-only basis requires careful budgeting and prudency each month, and it can prove extremely stressful in the long run. Still, this strategy may be a good choice for those who are really incapable of handling credit.
But if you want to rebuild your credit score
, you can't sit on the sidelines. Yes, it is true that a bankruptcy statement casts a heavy blow to your reputation when it comes to lenders. Most of them will only grudgingly agree to place their trust with you again if you’ve trifled it away already. Still, you should remember that nothing in credit is forever and you may start rebuilding your credit record, say, with a pre-approved credit card. Of course, it won’t be terribly difficult to get one: keep in mind that many lenders target recent bankrupts and bombard them with easy credit offers
. When considering them, however, be aware that some lenders may try to take unfair advantage
of your unfortunate situation by attaching additional charges and fees to their credit cards. So, before accepting a pre-approved credit card offer, make sure you are familiar with all terms and conditions
of the deal.
You should also bear in mind that the interest rate on the balance of your pre-approved credit card may soar as high as thirty percent a year. Still, your bank or credit union may agree to give you a credit card with a reasonable interest rate if you have a good credit history with them. Your chances increase if you are able to give them a logical explanation as to why you found yourself compelled to file a statement of bankruptcy. In addition, you may write a letter to all of the credit reporting agencies
and let them know why you had to file for bankruptcy.
It is also wise to open a savings account and save between 5 and 10 percent of your pay. Then, use the savings account as collateral and apply for a small loan. Be sure to repay the loan in a timely manner. Opening a savings account is also important in proving to lenders that you handle money in a responsible manner.
This one is obvious – don’t spend more than you get. Avoid purchasing expensive luxury items, most of the time you don’t really need them. As a rule, payments on consumer debt
should not exceed 20 percent of your expendable income
(after you pay rent and all utility bills).
Applying for a secured credit card
is another available option for recent bankruptees - you put down a reasonable down payment, make regular monthly payments for two years and get your deposit back, as your credit card
automatically becomes unsecured
after two years. At least, this is how it works with most of the banks and credit card companies in Canada and the USA.
Alternatively, you may ask a friend, relative, or your wife to become a joint applicant on a credit card. Have in mind that your co-signer must have a good credit score. If, for some reason, you fail to make the minimum monthly payments on your co-signed credit card, your co-signer will shoulder the responsibility for your debt. In addition, the co-signer will appear on the credit report
, and this will weaken your situation with regard to future lenders.
Before considering any of these options for rebuilding of credit score, you need to make sure that the statement of bankruptcy has been properly written in your credit report and all of your previous obligations have been wiped out. Sometimes creditors report bankruptcy discharges as ‘write-offs.’ Furthermore, you have to keep track of whether the credit you pay is reported correctly. Timely credit payments are what you need to rebuild your credit score.