Bankruptcy

Why And When Should You Apply For Credit Cards After Bankruptcy?

You must be quite reluctant to obtain and use credit cards after bankruptcy because of the fear that it can further ruin your finances. Here, it is very important for you to keep in mind that the problem is not with credit card; the problem is the overuse of it. The “use” of credit cards can be beneficial for a bankrupt individual, especially when it comes to improving the FICO score. But yes, the “overuse” of it must be avoided at all cost. Following is a brief rundown on some of the various aspects associated with it.

Reasons Why You Need Credit Cards Even After Getting Bankrupt

The life of a contemporary American runs on credit. Bankruptcy reduces your FICO score to the lowest level. And, an easy way to boost your credit score is by using credit in a more responsible way. Your financial life depends very much on how good your credit history is. Obtaining credit cards after bankruptcy and then making its payment in full every month is the easiest way to rebuild your credit history. Many employers these days check credit reports of the job applicants before hiring them. Though you cannot be denied employment just on the basis of bankruptcy, there are still several job positions that you cannot qualify for because of your bad credit history. A poor FICO score will also make it very difficult for you to obtain insurance or loans (mortgage, car loan or any other loan). Even if you manage to obtain one, you are likely to be charged a comparatively very high interest on loans or premium on insurance. Even landlords and utility service providers check your credit report in order to determine whether they should rent a house to you and whether you should be provided utility services in your name, such as electricity and telephone connections. Even if you manage to get a rented home or a utility service in your name, you are likely to be asked to make a very high amount of money as security deposit. It means when it comes to getting your finances back on track after bankruptcy, the only way to do this is to do everything possible to rebuild an impressive credit history.

How Credit Cards Can Help You Rebuild Your Credit History?

The answer depends on the wise use of credit cards after bankruptcy. You obviously will have to be very careful with the way you use credit cards and for which types of purchases. Most importantly, you must pay off the outstanding balance on it in full every month. If you end up making just the minimum monthly payments, you will actually be hurting your FICO score and damaging your financial situation furthermore. When you are current with the monthly payments, it demonstrates your good financial behavior. It gives an impressive message to everyone (landlords, mortgage lender, car loan lender, utility serviuce providers) that you have learnt from your mistakes and are now working hard to improve your credit worthiness.

Which Type Of Credit Cards You Should Apply For?

In general, you have two options – you can either apply for an unsecured card or a secured card. You are strongly recommended to obtain secured credit cards after bankruptcy. Anyone can easily qualify for secured cards by making an advance deposit of a certain amount of money, which becomes the maximum limit. It means if you deposit $500 to obtain a secured credit card, you will not be able to spend more than $500 using this card. Because of such specific nature, these cards are sometimes also referred to as prepaid credit cards. It is safe and secure. And, the best part is that you can qualify for it very easily at a very low interest rate. Unsecured cards on the other hand are not only very difficult to qualify for, but they are also often tagged with a very high interest rate and other charges. Not to mention, they can be very risky, especially if you are still unable to control your spending habit.

In any case, you have to be very wise in using credit cards after bankruptcy. It is often the irresponsible financial behavior of people that pushes them toward taking a drastic step like bankruptcy filing. You must not repeat the same mistakes again. What is more, do not look out for quick fixes. It takes time to rebuild credit history even by using secured credit cards. So, have some patience and just be consistent in your efforts.


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Posted in Bankruptcy, Life After Bankruptcy | 1 Comment »

One Response to “Why And When Should You Apply For Credit Cards After Bankruptcy?”

  1. Jackson says:

    Very interesting and knowledgeable points. If you have gone through the trauma of being bankrupt just now, it does not mean that you are not liable to start your normal life again. For the financial needs you have to go for a credit card because today life does not seem to be possible without credit cards. Credit cards have become the necessity of today’s life. Credit Score will be checked whether you go to any employer for a job or you go to get a house on rent and so on. Credit Score plays a very central role in your financial circle; you can get a good score by using the credit cards and making the full payments every month. It is very important to use the credit cards but do not over use it. Any individual who is trying to recover from the tragic period of bankruptcy should be use credit cards very wisely. It will be good to get a secured credit card, it will be on a very low interest rate and it will not allow you to cross your expenditure limits. After Bankruptcy, one should need to be very careful about his / her financial discipline.

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