Filing for Bankruptcy can have grave implications on your credit score. One of the major downsides to filing for bankruptcy is having a bad credit score for the following 7-10 years. This is why it can be particularly difficult for you to get a credit card after bankruptcy.
Acquiring a credit card in bankruptcy can be a particularly daunting task for many, but by taking the right steps, you can soon find yourself on the right track. Before securing a credit card, you will want to keep paying your bills on time and carry as little debt as possible, without making any errors in punctuality of payments. Your chances of finding yourself a credit card will increase drastically if you apply about three months after filing for chapter 7, or 3-5 years after filing for chapter 13, and keep making regular payments on the cards you do have. Making timely payments and keeping low balances (low debt to income ratio) will increase your credit score significantly and lets banks see that you can be trusted with regular payments.
Finding a credit card in bankruptcy is not all that difficult a task. You may have come across the concept of secured and unsecured credit cards when looking for credit cards that accept bankruptcies. Banks generally roll out secured credit cards for people with a bad credit score. These cards work just like any other unsecured credit cards. The only exception here is that you must deposit a certain amount of money for your secured credit card as a safety net in case you end up missing out on a payment. This amount deposited will be the same as your maximum credit limit.
Depending on the kind of bankruptcy that you filed for, there can be major differences in your interest rates for post-bankruptcy credit cards. A chapter 7 bankruptcy is one that clears off all your debts and leaves you with a severely compromised credit score for up to ten years. People usually find it difficult to procure a low interest rate unsecured credit card after chapter 7 bankruptcy. Banks are more willing to roll out a secured credit card until a line of trust is established with the first few payments. After a year of regular payments, chances are that your credit score will look a lot better and you could be approved for a decent unsecured credit card. There is also a chance that your credit score remains unaffected even after bankruptcy. A chapter 13 bankruptcy is one that restructures your organization in order to create an efficient system under which a portion of your debts is to be paid off in the next 3-5 years. This has a comparatively better impact on your credit score and stays for up to 7 years. This is why it can be comparatively easier to get an unsecured credit card after bankruptcy via chapter 13.
Most people who suffer a major hit to their credit score prefer to wait for at least a year and build it back up before applying for a credit card. By doing this, your credit score gets significantly better and you have a better chance of procuring an unsecured credit card which doesn’t charge you an exorbitant interest rate. Regardless, there are always credit cards for people with bankruptcies.
When you try to get selected for a credit card, there may be quite a few who approve you but may charge you really high interest rates. Avoid an interest rate north of 20% as it can be difficult to keep up with. You can always opt for a secured credit card for now and wait to have an unsecured credit card approved with a decent interest rate.
If you are ever in a fix and find yourself confused, it is best to contact experts who know this field. By speaking with a capable attorney, you will not only feel more confident about your future plan of action, but you’ll also understand your options better. At Dsouza & Strachan Law Group, you will find a team of such capable attorneys who are more than well versed in this field. (phone number)
1Comment