Most people are able to obtain credit cards after bankruptcy, even relatively soon after a bankruptcy, but many people who have suffered a bankruptcy assume they won't qualify so they do not try. It is really just a matter of knowing how to get a credit card after bankruptcy and rebuilding your credit score. While it is certainly true that a bankruptcy on your credit report is a giant red flag to lenders, the consequences are not by any means permanent. It is possible to qualify for all types of loans with reasonable rates while the bankruptcy is still on your credit report if you re-establish your credit and show that you learned from your mistakes. Getting and wisely using secured credit cards after bankruptcy can help you do both.
No entry, not even a bankruptcy, remains on your credit report for all of eternity. Legally, a bankruptcy can stay on your credit report as long as ten years. If after your bankruptcy you demonstrate that you have learned from your mistakes by using credit responsibly, the effects of the bankruptcy on your credit score are decreased as your more recent history indicates that you are credit worthy.
Expect to be unable to obtain unsecured credit cards after bankruptcy. Secured cards are another matter entirely, however. You can qualify for a secured card even with a recent bankruptcy on your credit report and secured credit cards will help you re-establish your credit.
With a secured card, your credit limit will usually be equal to the amount you deposit with the bank that issues the credit card. The amount of the deposit and thus your credit limit will usually be somewhere between two hundred and five hundred dollars. That is not very much credit, especially if you used to have significantly higher limits prior to your bankruptcy, but it is enough to start rebuilding your credit score which is the whole point of getting a secured card. You should not be maxing out your secured card or worrying about limits.
As with unsecured cards, all secured cards are not created equally. You stand to benefit from shopping around for the best deal on a secured card so do take your time and do not just go with the first one you find. Compare application fees and annual fees. Make sure that your payment history will be reported to TransUnion, Equifax and Experian, the three major U.S. credit bureaus. Ask if or when your secured card will convert to an unsecured card. Many secured card issuers will convert your account to an unsecured card if you make one to two years worth of regular, on time payments.
Some financial advisors and personal finance experts recommend paying for everything in cash, particularly after a bankruptcy. If you cannot exercise any financial discipline and cannot manage your credit wisely, then making all of your purchases with cash is undoubtedly the best way to live. Just because you can get credit cards after bankruptcy, that does not mean that you should.
If you wish to re-establish your creditworthiness and improve your credit score, however, you will need to obtain and use credit responsibly. Using credit responsibly means paying your bills on time every time, using no more than a quarter of your total available credit and paying your bill in full every month. You also shouldn't be applying for more credit than you need.
Your bankruptcy should serve as a financial wake up call from which you can determine where you went wrong then make changes to the way you manage your money. If your spending exceeded your income, set a budget and stick to it. If a major, unexpected expense or an unforeseen event such as getting laid off led to your bankruptcy, focus on building up cash reserves and establishing emergency savings. Getting credit cards after bankruptcy is not likely to be your biggest problem so make sure you make an ongoing effort to address the issues that led to your bankruptcy.