If you have recently filed for bankruptcy, it may seem like you will never be able to get credit again. Companies everywhere try to scare you into thinking that it will be at least 10 years until any lender will consider working with you. Is this true? Read on to find out!
It is not as difficult as you think!
The reality is that getting after bankruptcy credit is not as difficult as you think. The new bankruptcy laws passed in 2005 actually work to the advantage of lenders and make them more willing to grant loans to people who have a discharged bankruptcy. Why? Because under the new laws, lenders now know that you cannot file for bankruptcy protection for another 10 years. This means that in the event of a default, they can sue you, get a judgment and garnish your wages. Now, they would of course prefer that you pay, but they are much less worried about lending to you than someone who has not filed bankruptcy and has $50,000 worth of credit card debt.
Follow these three steps
Secured Credit Card
The first thing you will want to do is apply for a secured credit card. This is a credit card where you place a deposit with a lender and then are issued a credit line against the deposit. These cards are also called guaranteed credit cards, because approval is based on your deposit not your credit.
It is important to make sure that you select a company that reports to all three credit bureaus. You also want to avoid paying any type of application fee and make sure that the overall fees are reasonable. There are several companies out there whose primary goal is to take advantage of people with bad credit. These cards have fees associated with them that account for almost 100% of your available credit line.
Secured Bank Loan
While many people know they need to reestablish their credit with a secured credit card, people tend to overlook the fact that they also need to reestablish their installment credit history. The easiest way to do this is to go to your bank and get a certificate of deposit loan. As an example, you open a CD with a 24 month term. The bank then issues you a loan with a 24 month term against this CD. Like a secured credit card, you are paying interest on your own money, but remember, the purpose is rebuilding your credit history.
Unsecured Credit Card
After you have established a secured credit card and secured bank loan, you will want to make at least six on time payments to these accounts. Once you have done this, it will be time to look for an unsecured credit card.
Believe it or not, there are numerous unsecured credit cards that specialize in working with people who have bad credit. The key is finding one that works for you! Companies to look at are Capital One and Orchard Bank. Both will issue a credit card to someone with a fairly recent bankruptcy. Expect your credit line to start out small! The good news is that most companies with these types of cards offer an automatic credit line increase after a certain number of on time payments.