Rebuilding Your Credit: Credit Cards to Use After Bankruptcy
Many people become discouraged about their credit score after filing for bankruptcy. Depending on the type you filed, a bankruptcy can be listed on your credit report for up to 10 years. Even after your bankruptcy is discharged, there is a good possibility that your credit score will remain low until you take the necessary steps to begin rebuilding your credit. In this blog, we explain how to build up your credit after filing for bankruptcy.
Secured Credit Cards
Getting a secured credit card is one good way to rebuild your credit if you are coming out of a bankruptcy. It is important to remember that until your bankruptcy is discharged, you can still be turned down when applying for a secured credit card. This doesn’t necessarily mean it’s impossible to get a credit card before your bankruptcy is discharged, though post-bankruptcy options can be limited and usually have annual fees and high percentage interest rates.
When you are approved for a secured credit card, you make a deposit into a savings account. This deposit secures your line of credit. Usually, the credit limit on a secured card is equal to the amount that was deposited, minus any applicable fees.
In order for a secured card to help rebuild your credit, you will need to make small purchases and pay your account on time each and every month. Keep the balance low and try to only use 10%-15% of your credit line each month.
When looking for a secured card, you want to make sure you pick one that reports to all three major credit bureaus. To maximize your rebuilding effort, ensure that all of your on-time payments get reported on all three of your credit reports.
Retail cards and department store cards have less stringent credit requirements than traditional credit cards. You can usually qualify for one after your bankruptcy if you have made several months of payments on a secured credit card.
Because these cards tend to have higher interest rates, it’s important that you pay your balance in full every month. A few small charges each month and making sure your payments are on time is all you need to rebuild your credit and payment history. Remember, your payment history accounts for 35% of your credit score, so avoid making any late payments.
Do you have more questions about rebuilding your credit after bankruptcy? Contact our St. Augustine team of bankruptcy attorneys to schedule a consultation.