Rebuilding your financial life after bankruptcy is not easy. Your credit score has taken a tremendous hit and needs to be increased. This will take time but you must be diligent in working toward this goal. One way for people with bad credit to do this is through the proper use of a credit card. Here are some different ways to get a credit card after bankruptcy so you can get back on the correct financial path.
Get a Secured Credit Card
Secured credit cards are good tools for building credit. They act just like traditional credit cards, with one major catch. Instead of borrowing money from a credit card company, you will "borrow" money from an initial deposit you make on the card. If you put $2,000 on the card, that is going to be your credit limit. You can swipe your card and pay back the balance over time just like you would with any other credit card.
Why would you ever want to pay interest and annual fees for a secured card where you have put up the money that you will borrow? Because that is the price you have to pay for the secured credit card provider to report your payments to the credit bureau. If you build your credit enough to qualify for another card, you can simply cancel your account and get your money back, less any transactions that are still pending on the card.
Find a Cosigner
If you have a friend or family member who is willing to cosign on a card, you might be able to obtain a card with that person's credit. This is similar to what you might do to get a car loan or mortgage loan after bankruptcy. The cosigner puts his or her credit on the line and commits to paying off the loan or credit card payment if you fail to do so. Pay on the account successfully and both of your credit scores go up. Miss payments and each of your credit scores decrease.
Not all credit cards will allow for cosigners. You will still need to look for a credit card company that will work with bad credit applicants. Under the right circumstances though, this can give you an opportunity to get back in the credit world.
Apply for Credit Cards That Accept Bad Credit
Some credit card companies specifically target applicants with bad credit. In fact, you may find yourself overwhelmed with credit card offers after bankruptcy. These issuers figure you will be motivated to preserve your newfound credit, which means you will be more likely to make payments on your accounts than you were in the past. You could take one of these opportunities as a way to build your credit score.
Most credit cards for people with bad credit have high interest rates and low spending limits. If you're holding out for a card with an amazing rewards package, prepare to wait a long time. You will probably pay an incredibly high APR on your first credit card after bankruptcy. Watch out for extra fees you might have to pay on these cards.
Wait a While
If the options above do not sound appealing, you may simply have to wait a little while to apply for a credit card after bankruptcy. Time can be an ally after bankruptcy as long as you make positive payments on any accounts you still have open. For instance, if you were able to keep your car and home when you filed for bankruptcy, you will need to focus on making payments on time every month. One late payment can significantly damage your ability to build credit after bankruptcy.
