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One of the concerns that some people have about filing bankruptcy is getting a credit card after bankruptcy. You cannot incur debt during a bankruptcy without court approval. 

Therefore, you must wait until your bankruptcy case is closed and discharged before applying for credit cards after bankruptcy. It may seem like a bad idea to most people because filing bankruptcy gets rid of credit card debt. However, getting a credit card after bankruptcy can help rebuild your credit rating, provided you use the knowledge you learned from your Debtor Education Course to manage your finances and debts wisely. 

Filing for Bankruptcy and Credit Cards

Filing for bankruptcy can seem like the end of the world for some people. They fear they will never be able to own a home, purchase a new car, or obtain credit after bankruptcy. In most cases, filing bankruptcy does result in all your credit cards being closed by the creditor. In rare cases, a credit card with a zero balance may be left open by the creditor. However, that is not typical. 

However, filing Chapter 7 or filing Chapter 13 is an affordable and effective way to get rid of debts you cannot afford to pay. You may have lost your job, been injured in an accident, got divorced, became permanently disabled, or sustained another financial crisis. Whatever the reason may be, you were unable to continue paying your debts. Bankruptcy gave you a fresh start to rebuild your finances. Now it is time to begin rebuilding your credit.

Using Credit Cards to Rebuild Credit Scores After Bankruptcy

A Chapter 7 bankruptcy case remains on your credit record for ten years. A Chapter 13 bankruptcy case remains on your credit record for seven years. You cannot do anything to speed up the removal of a bankruptcy case from your credit report. However, you can begin rebuilding your credit rating as soon as your bankruptcy case is closed.

The best way to rebuild credit is to make all future loan and credit payments on time. Late payments cause a credit score to decrease very quickly. You need to prove to creditors that you can manage credit wisely and make all future payments on time. You also need to establish that you repay your debts by avoiding collection actions, including future medical debts, rent payments, and lease payments.

Therefore, as you begin using credit cards after bankruptcy, keep in mind that you need to manage your finances and all debts. If not, your credit score will not improve very much.

Bankruptcy Friendly Credit Cards 

Beware! You will likely receive credit card applications after your bankruptcy case is complete. Creditors know that you discharged your debts in bankruptcy. Therefore, they want to be the first company to get a credit card back into your wallet. However, most credit cards after bankruptcy have very high interest rates. If you are one day late on a payment or exceed the credit limit, other fees may apply.

Always read the entire credit card application before applying for a credit card. You need to choose the best credit card for your needs. Applying for too many credit cards within a short time can lower your credit score instead of helping it. 

Some bankruptcy friendly credit cards that you may want to research include:

Secured Credit Cards

Secured credit cards are offered by many of the major credit card companies and a few lesser-known companies. The company requires that you place a security deposit on the account in case you default on the account. However, other than that, secured credit cards can be vastly different.

Some secured credit cards have lower interest rates and offer points or rewards. As with other credit cards, make sure you read the entire credit card application, including the fine print. A few secured credit cards you may want to consider include:

We are not recommending any of the above credit cards or companies. We do not endorse them and have no specific knowledge about the accounts and terms offered.

Credit Union Credit Cards

If you belong to a credit union, you may want to apply for a credit card through the credit union. Many credit unions are forgiving when it comes to their members. However, you will likely still pay a high interest rate for a few years until you prove your credit worthiness again.

Department Store Credit Cards

Department store credit cards can be easier to obtain than a major credit card. The credit limit will be low, and the interest rate will be high, but it can allow you to rebuild your credit after bankruptcy. 

Tips for Using Credit Cards After a Bankruptcy Case

Things to keep in mind as you begin using credit cards after bankruptcy include:

  • Always read the fine print. We cannot stress enough how important it is that you read the entire credit application and agreement before applying for the credit card. You need to understand the terms and conditions for the use of the card.
  • Shop around for the lowest rate and best terms before you apply for a credit card after bankruptcy. Limit your credit applications to just one or two cards.
  • Never max out your credit limit. Keep the total balance owed on the account to less than 30 percent of the total credit limit. 
  • Make all payments before the due date to avoid late payments on your credit report.
  • Verify with the credit card company that it reports the activity to the credit reporting agencies. You cannot rebuild your credit after bankruptcy unless your on-time payments and credit record are reported to the credit reporting agencies.
  • Before applying for a credit card, establish an emergency savings account in the amount of the credit limit on the card. If you lose your job or have any financial problems, you can cover the payments on the credit card to avoid damaging your credit again.

Using credit cards after bankruptcy is a big decision. Do not feel as if you need to rush into credit again. If you have a car loan or a mortgage, continue making those payments on time. Make all rent, lease, cell phone, and utility bills on time. Monitor your credit report and credit score. When you are ready and financially stable, you can then use credit cards to improve your credit score.

Ascend Is Here For You If You Need Help With Debt Relief

Ascend provides information and services related to bankruptcy filings, debt settlement, and debt management. Our goal is to help you get out of debt in a way that gives you the foundation you need to build a secure financial future.If you have questions about debt relief, bankruptcy, or our services, please contact Ascend by calling 833-272-3631.

Post Author: Ben Tejes

Ben Tejes is a co-founder and CEO of Ascend Finance. Before Ascend, Ben held various executive roles at personal finance companies. Ben specializes in Chapter 13 Bankruptcy, Debt Settlement, Chapter 7 Bankruptcy and debt payoff methods. In his free time, Ben enjoys spending time going on adventures with his wife and three young daughters.

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