Life after bankruptcy gets a lot easier when you know how to apply for credit and use it to rebuild your finances. That’s why it’s important that you’re informed and prepared. Let’s explore how you can apply for a new credit card after your bankruptcy discharge.
Credit Reports
The first thing you should do is order your credit report from all three credit reporting bureaus, Experian, Equifax, and TransUnion. Check your reports for accuracy. Is your bankruptcy discharge listed? Have all the balances on the loans and credit cards included in your bankruptcy been zeroed out? Do your old accounts acknowledge that your debts have been forgiven in bankruptcy? If you find any inaccurate information, demand that it be corrected or removed.
Credit Score
After all information on your credit report is updated to reflect the changes after your bankruptcy, you should order your credit score (it is not always included in a credit report). If you can, order the score from all three bureaus since they each calculate the score differently. Credit card companies often use the average of all three credit scores to determine your creditworthiness.
Secured Credit Card
While it’s possible to get an unsecured credit card right after bankruptcy, it’s not likely, and any unsecured credit card you get may have very high fees and interest rates. That’s why applying for a secured credit card is a better bet right after your bankruptcy discharge. With a secured credit card, you deposit a set amount with the lender (usually around $300) as security and then borrow against it. You will need to repay any amount you borrow in a timely fashion just like you would with an unsecured credit card. The lender will report your payments to the credit bureaus and help you rebuild your credit reputation.
Fees
Watch closely for abusive fees. The best secured credit cards have moderate interest rates and do not have an annual fee. Also, be cautious about any secured credit card that tacks on fees when the card isn’t used for a certain period of time.
Trust
After about 12 months of timely payments on your secured credit card, the lender will extend additional credit to you. This could be double or more the amount of security you have deposited with them. So if you deposited $300, you might receive a credit line of $600.
“Choose the right secured credit card after bankruptcy and let it help you rebuild your credit history.”
