After filing for bankruptcy, your credit report, along with your credit score, can take a serious dive. Bankruptcies signal serious risk to potential lenders, including credit card companies, making it very difficult for you to get approved. Although there are a few lenders on the market willing to give those with bankruptcies a card, these cards often come with high interest rates, along with yearly fees and set up costs. Luckily, there is a way to get a real credit card without being hit hard with hidden fees.
Step 1
Get a secured credit card through your bank. A secured credit card works much like a credit card, only you secure the card with a cash deposit. There are many different secured cards on the market, but not all of them report to a credit bureau. Not only do most banks report your payment to credit bureaus, you also have the opportunity to have your security deposit refunded, and a real credit card issued, once you have shown an ability to pay your bills on time. Other secured card companies may also take advantage of you with outrageous interest rates, setup fees and yearly fees. Most banks tend to be more reasonable in these areas.
Step 2
Put down your security deposit. The security deposit is placed in a saving account as collateral in case you default on payments on your card. Your credit line will usually be equal to the amount of the security deposit. There are many different secured cards on the market, but not all of them report to a credit bureau.
Step 3
Only spend what you can afford to pay off every month. The key to quickly being moved from a secure credit card to a real credit card is using the card every month, and then paying your balance completely off at the end of every month. This both keeps your debt to credit ratio low, helping to raise your credit score, but also shows the bank you are being responsible with your credit.
Step 4
Pay your bills on time every month. Late payments are a quick way to have the bank take away your secured card privileges. When this happens, the bank takes what is owed on the card from your security deposit and refunds the rest back to you. The card is then void, and it may take some time before you are allowed to open another secured card at the same bank.
Step 5
Talk to your bank about upgrading your secured card to a regular credit card. Once you have at least six month of good payment history, talk to your bank about being issued a real credit card in place of the secured credit card. If the bank approves your request, you will usually start with a credit line similar to your secured card. As you continue to use your credit wisely, the bank may increase your credit limit. Through this whole process you will also be building a better credit score. This may allow you to apply for other lines of credit through other lenders as well.
Tips and Warnings
- During your bankruptcy settlement, you may have a chance to keep some of your credit cards. Talk to your bankruptcy attorney about the options available to you in this matter.
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