Credit Building

Where (and How) to Get a Credit Card After Bankruptcy

Bankruptcy filings in America totaled 819,240 (source) in 2015. While that number represents a 10 percent decrease from the filings of the previous year, there are still many people who have or will experience  bankruptcy.

Experian, one of the three major credit reporting agencies, said:

“A bankruptcy is the greatest indicator of risk in a credit report, and so has the most serious and long lasting impact on your ability to obtain new credit. Even if you can qualify, it might not be the kind of credit you should want.”

Since bankruptcy has such a negative effect on your credit score, you may be wondering where and how to get a credit card after bankruptcy. Is it even possible? If so, what should you know about obtaining credit after a bankruptcy?

Is it possible to get a credit card after bankruptcy?

The short and sweet answer is: yes. You can get a credit card after bankruptcy, and that might be the best way to rebuild your credit. That said, it may not be easy to get one, and you may not be able to get the exact type of credit card you want. You will need to do some research to see what options are available to you.

More read: Best credit cards after bankruptcy

Why should you check your credit report after bankruptcy before applying for a credit card?

It’s important to realize that every time you apply for credit, a hard credit inquiry occurs with the credit reporting agencies: Transunion, Experian, and Equifax. Each hard inquiry puts a potential dent in your credit score. Since bankruptcy already impacts your credit score negatively for the next seven to 10 years, it’s best to avoid unnecessary hard credit inquiries when possible.

Therefore, before you begin applying anywhere for a credit card, it makes sense to check your credit score to verify that your credit report is correct. Requesting a copy of your own credit report does not affect your credit score. You can request a free copy of your credit report with sites like Credit Sesame.

After bankruptcy, it makes sense to check your credit report to be sure that any delinquent accounts discharged by the bankruptcy are showing as cleared on your credit report. If you see accounts closed in the bankruptcy, but still showing as delinquent, you need to contact the credit reporting agency and have the account removed from your report.

Taking a proactive stance regarding the accuracy of your credit report will improve your chances of getting a credit card when you do apply. Plus, checking your credit score regularly will help you to stay on track with your financial goals.

How long after bankruptcy can you get a credit card?

Technically, you can apply for a new credit card as soon as you file for bankruptcy, but that may not be the best option for two main reasons. First, your credit score takes a massive hit when you file for bankruptcy, and if you immediately apply for a new credit card instead of waiting for just a bit, it may be more likely that a credit card company will deny your application outright.

Second, and more importantly, you need to give yourself time to work on managing your financial affairs more responsibly. The last thing you want to do after going through a bankruptcy is to endanger your credit standing further.

So, before applying for a credit card, be sure that you commit to remaining debt free and that any bad financial habits that led to your bankruptcy are no longer a concern for you.

How can you repair your credit after bankruptcy?

Once you identify and address any issues that led to your bankruptcy, you are ready to start rebuilding your credit. It may surprise you that after a bankruptcy, you begin to receive credit card offers in the mail right away.

But there is something important you should know about these offers. The cards offered generally have very low credit limits and very high interest rates. These are not the most desirable credit cards for you, but if necessary, they can help you rebuild your credit when no better options are available.

If you choose to accept a credit card offer like this, make a promise to yourself that you will not carry a balance from month to month on your card. Make just one purchase per month on such a card, and be sure to pay that purchase off every month. In time, doing this will build your credit slowly.

A better option is to apply for a secured credit card instead.

What is a secured credit card, and how can you use secured cards to repair your credit?

The most common type of credit card is an unsecured card. This means that you do not have to put up collateral to get a credit card. But unsecured credit cards may be hard to come by when you have a bankruptcy on your credit report. Lenders are typically less likely to take a chance on you if they see charge-offs for accounts on your credit report.

This is where secured credit cards can help. With a secured credit card, the card issuer requires you to put up a deposit in order to get the card. At a minimum, you need to save several hundred dollars to make a secured credit card worthwhile. In most cases, your credit limit is the same amount as your deposit. So, if you want a card with a $500 credit limit, you will need to put up at least $500 as collateral to get it.

After you get your secured credit card, you will use it in the same way as you use any credit card. You will make charges every month, and pay a credit card bill every month. Remember that the whole purpose of getting a new credit card is to help you rebuild your credit. The best way to do that is to charge a small amount each month on your card, and then pay the balance off in full each month.

After several months of responsible credit card use, your card issuer may offer to convert your secured credit card into an unsecured card. If this happens, you will get a refund of your deposit amount and get a new credit limit as determined by your card issuer.

Other than a secured credit card, what else can you do to repair your credit?

The best way to repair your credit is to pay your bills on time, every time. So, if you have debts that were not discharged in the bankruptcy, work on paying those debts as soon as possible. Lenders look at your debt-to-income ratio when considering whether to extend credit to you. So, the less debt you have, the better your chances of getting a loan or credit card.

You might also apply for retail cards, such as department store cards or gas cards. These cards usually have a hefty interest rate, but they are sometimes easier to get than other types of credit cards. If you go this route to rebuild your credit, it is very important to use the cards responsibly. Do not charge more than you can pay off each month, and do not ever miss a payment.

Where can you find a credit card after bankruptcy?

After a bankruptcy, you may want to check with your local bank or credit union to discuss your credit card options. Credit unions, in particular, may be willing to offer secured credit cards with reasonable interest rates and annual fees to their members.

As mentioned previously, you may also get credit card offers in the mail. Be sure to read all the fine print. You are looking for:

  • Low interest rates.
  • No or low annual fees
  • A 30-day grace period.
  • A card that reports activity to the three major credit bureaus. (Without this feature, you cannot rebuild your credit with your card.)

Another excellent way to find a credit card after bankruptcy is to research credit card companies and offers with SuperMoney. With hundreds of customer reviews and feedback from actual people, SuperMoney gives you an easy way to sift through credit card offers with confidence. Use our handy tools to search the best credit card offers now.