Posted By admin on October 15, 2012
You’ve been through bankruptcy and may now want a credit card, but don’t know where to start. We’ve got some tips for you.
First, let’s not mince words; bankruptcy is major life event for anyone who has to go through with it. It is still just one event in the middle of a stressful time, which spans years, even decades. It is preceded by a possibly anxiety-filled time when payments cannot be fulfilled.
Many will feel relieved once the process of bankruptcy has ended, as many of the debts which were the figurative monkey on their backs is now gone.
That feeling of relief may not last very long, as the process is far from over. Starting over fresh might mean you’ll have less debt to stress over, but you’ll lose out on the all-important debt history that allows you to get qualified for lending.
Chances are it will be very difficult getting credit after you have exited bankruptcy, even for years after.
How to get a credit card after bankruptcy
One of the first types of credit that is most often available after bankruptcy is a credit card. Getting credit cards after bankruptcy may not be as simple as the first time you got one as, even though years have passed since your discharged, you may not have enough credit history to qualify.
Furthermore, the rates associated to after-bankruptcy credit cards may not be all that great.
Credit cards are often your first potential credit after bankruptcy, as they can offer the smallest amount lent, compared to car loans and mortgages.
Getting a credit card after bankruptcy can be a good thing, and even recommended, as a good history of use and payments will go a long way in establishing a good credit history that can be leveraged to eventually get those bigger loans like car loans and mortgages.
Rebuilding your credit history
That is why you’re first order of business after bankruptcy would be to rebuild your credit history, even before you can get credits cards to build your credit history.
Depositing regularly into a savings account, even if it’s a small amount, is one of the easiest and most important steps to begin rebuilding your credit. Similarly, contributing to your retirement savings on a regular basis (though if you can only do it sporadically, then take any opportunity you have) will also help you rebuild your credit.
A method that works for many is automating these payments to be taken out of your account directly into their own accounts that removes the temptation to spend it instead.
Don’t run a balance in overdraft or on your credit cards. You should use your credit cards, however, just don’t leave a balance month over month. The same goes for any other payments you need to make regarding your rent and utilities.
Time heals all wounds, as they say; so don’t expect to be showered with credit the minute you do one of these initiatives. As we repeated, history is what’s important, so it might take a few years of doing these things consistently before you’ll truly see the benefits.
As a side note, it has been said that one should avoid companies that offer “Credit Repair” services. The reasoning is that no company has the ability to do anything that you can’t do for yourself.
However, there may be not for profit organizations that can assist you with the support you need. The last thing you need after bankruptcy is to take on fees that can be avoided.
Types of credit cards available after bankruptcy
One of the first types of credits cards to look into after bankruptcy is the secured credit card. Basically, a deposit you give to the issuer is what backs the secured credit card.
At the end of the day, you may not have access to more money, but what you are doing is getting your first shot at establishing a new and improvement credit history. Do well with this, and you can graduate to real credit, and so on and so forth. A secured credit card is probably your best chance at starting a new credit history.
Doing It Right the Second Time Around
What’s important to note regarding all the steps you need to do to rebuild your credit score is that regardless of whether you get approved for new credit or not, all is not lost. These are just good practices to have whether you need credit or not.
Saving money in savings account. Saving for you retirement. Paying off your balances. These are all things you should be doing regardless of your situation. Regardless of the reasons for your bankruptcy, be sure to get your finances right the second time around.
There is never a bad time to get your finances in order, though its much easier to start on the right foot than to do after you realize you’re in over your head. There is a reason why these steps help you access credit; lenders want to get their money back, and if you show them that you have control over your financial destiny, they will come around. Remember, bankruptcy isn’t a way out of a stressful lifestyle of debt if you’re just going to fall into that trap again.
Once you get the needed credit card after bankruptcy, don’t fall back into old habits, keep on saving and paying down, and you’ll have one less stress on shoulders, not to mention the ability to retire more comfortably.
So, don’t forget to:
• Put money into a savings account regularly.
• Save for your retirement.
• Keep on paying down your debt.
• Never leave a balance on your credits cards after bankruptcy.
• Don’t overdraft.
• Apply for a secured credit card for your first new credit trial.