How to Get a Credit Card After Bankruptcy

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If you’ve gotten in over your head with credit cards, medical bills or other types of debt, filing for bankruptcy protection can help you to get your finances back on track. While filing bankruptcy can help you to get out of debt, it can also cause long-term damage to your credit. Getting a credit card after a bankruptcy filing can be difficult but it’s not impossible if you know what steps to follow.

Step 1: Check Your Credit Report

Within a few months of receiving your bankruptcy discharge, you’ll want to get copies of your credit report from each of the three major credit bureaus. When you get the reports, you need to go over them carefully to make sure your accounts are being reported properly. If you find an error or inaccurate information, you should contact the appropriate credit bureau to initiate a dispute.

Step 2: Evaluate Your Creditworthiness

Before you apply for a credit card, you need to understand how potential lenders may view your situation. Filing a Chapter 7 or Chapter 13 bankruptcy case can cause your credit score to drop as much as 200 points. If your credit score was low before the bankruptcy due to multiple delinquencies, collection accounts or charge-offs, you can expect your score to be even worse coming out of the bankruptcy. If your credit score was still relatively high, your score will still suffer but the damage may not be as bad. In addition to your credit score, your income and length of employment are also factors in determining your creditworthiness. Recognizing what factors are working for or against you can help you to determine which type of credit card to apply for.

Step 3: Start with a Secured Credit Card

Credit cards are typically classified as unsecured debt, since there’s no collateral required. With a secured credit card, you deposit a certain amount of money with the card issuer, which serves as your collateral. You’ll be required to make minimum payments each month and you may be able to deposit additional money in order to increase your credit line. Secured credit cards typically charge higher fees and interest than you would pay with an unsecured card.

Step 4: Apply for an Unsecured Card

Depending on how much of a hit your credit score took during the bankruptcy, you may be eligible for an unsecured card anywhere from six to 18 months after your case is discharged. Certain card issuers offer unsecured cards that are specifically targeted for consumers who are trying to reestablish credit following a bankruptcy.

Fingerhut Credit Account
For example, the Fingerhut Credit Account is a store credit card that’s designed to help you rebuild bad credit. The card is designed for Fingerhut customers who want the option of making monthly payments on their purchases but may not be able to get approved for a traditional credit card. There’s no annual fee and your account is reported to each of the three major credit bureaus each month. As long as you pay on time and don’t go over your credit limit, your credit score should continue to improve. The card does have a 24.90% APR but you can avoid paying interest as long as you pay in full each month.

Final Word

In some cases, filing bankruptcy may be the only way to get rid of debt so you can have a fresh financial start. When it comes time to apply for a credit card after bankruptcy, knowing what lenders are looking for and which cards to choose can help you to maximize your chances of getting approved.

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