Credit Cards after Bankruptcy

One of the first questions most people have after claiming bankruptcy is "How do I start rebuilding my credit?". The more general answer is slowly but surely. A more specific answer would be to get yourself a credit card and start using it - smartly.

Getting a credit card won't be easy, but it certainly isn't impossible either. First things first - you may used to pick your credit cards for travel rewards, points or other perks. Be aware that within a year of claiming bankruptcy, you aren't going to get those "premium cards". All you do by applying for them is rack up credit inquiries on your credit report.

In life you learn to crawl, walk and then run. When rebuilding your credit - especially with credit card companies - after a bankruptcy you have to follow the same steps. This usually involves getting a secure credit card, then an unsecured credit card and then finally having the history to get the premium cards many people take for granted.

There are tons of companies out there offering secured credit cards. A secure card is almost like a debit card. If you put 500 dollars into the credit card account then your limit is 500 dollars. However, unlike a debit card, they don't automatically deduct payments. You pay it off like a regular credit card. But because of the deposit they have no fear of losing any money. If you don't pay, they'll take your deposit to cover the charges (and put a blemish on your credit report, so remember to pay the card).

First PREMIER Bank Gold Centennial MasterCard/Visa - BAD CREDIT CREDIT CARD
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First PREMIER Bank Centennial MasterCard/Visa - BAD CREDIT CREDIT CARD
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Orchard Bank MasterCard - BAD CREDIT CREDIT CARD
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Millennium Bank - Black Diamond Visa - SECURED CARD
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Get a secure card with a reasonable rate - with a secured card, this shouldn't be a hard task. But keep in mind the goal is to pay the card off each and every month (in a perfect world) to build up your credit history post bankruptcy. Make sure it has a limit you can feasibly pay off each month (so you don't get into trouble) and a deposit you can afford to be without.

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You can charge day to day expenses on the card just to build up a credit history - don't take your card to the mall and buy a new wardrobe. For example - one reader wrote in to us that they charged their groceries each week and then transferred the money from their checking account to their savings account online. When the bill came in every month, they transferred the money back to the checking account from their savings account and paid the bill.

They got to build a credit history without spending "extra" money they couldn't afford. But, keep in mind that you need to be disciplined or you'll end up right back where you were before the bankruptcy. You have to change your habits first and foremost to have any hope of restoring your credit.

Once you've proven yourself with a secured card, you can move on to applying for unsecured cards. Companies are getting a lot better about taking risks on post bankruptcy consumers - especially when they have some newer credit under their belt from secured credit cards.

It will take you several years before you're back to the "good old days" of travel reward program credit cards and super low interest rates. But with discipline and patience, you can definitely get there.


Related Articles:

+   What your bankruptcy record says about your credit worthiness
+   How credit counseling can help your financial habits
+   Getting a new mortgage after filing personal bankruptcy
+   Rebuilding your credit after bankruptcy and what to know