Handling Credit Cards After Bankruptcy
Posted on Sep 28, 2015 1:57pm PDT
For anyone who has filed for bankruptcy after struggling with credit card
debt, the thought of opening a new account can seem like a bad idea. When
used responsibly, however, credit cards are one of the easiest and most
effective ways to begin rebuilding your credit. The key here is to use
them responsibly, and to choose a card which will actually be of benefit to you.
How Soon Can You Get a Credit Card?
After filing for Chapter 7 bankruptcy, you’ll likely have some trouble
qualifying for premium credit cards, which includes anything with a low
rate and great rewards system. Although your ability to qualify for cards
should increase as more time passes, bankruptcy will stay on your credit
report for 10 years. There are a variety of credit cards which most people
can qualify for immediately, but it’s important to choose the right type.
Secured vs. Unsecured
When most of us think of a credit card, we think of an unsecured card.
This means that the issuer is essentially giving you a credit line on
faith, with the expectation that you have the financial resources to pay
them back. These are the types of cards that many people end up falling
behind on, often leading to Chapter 7 bankruptcy.
Secured cards, on the other hand, require you to put up a cash balance
as collateral against the credit line. Since you have already proven that
you have the money to pay off your balance, these cards are much easier
to get if you have damaged credit. These are NOT to be confused with prepaid
cards; although they work off a similar principle, activity on prepaid
cards is usually not reported to credit bureaus.
Tips for Dealing with Credit Cards
Armed with the right information, you can effectively rebuild your credit
through the responsible use of credit cards. While your unique circumstances
may vary, as a general rule you should try to:
- Choose a secured credit card which reports activity to the credit bureaus
- Make sure you use the credit card every month for a few small purchases
- Pay off the entire balance each month, on time
Of course, rebuilding your credit is just part of a plan to get your finances
in order after bankruptcy. You’ll benefit greatly from creating
and sticking to a comprehensive budget, and by forcing yourself to save
money for a rainy day. For more information, see our page on
credit repair.
Considering bankruptcy? Contact Purcell Law Firm, P.C. today at (678) 853-6497.