Applying for a credit card after bankruptcy might be the last thing you think you should do, especially if credit card debt was part of the problem that led to bankruptcy. However, to start rebuilding your credit after bankruptcy, you must apply for a credit card or two. The key is to use credit cards carefully and to not make unnecessary purchases. Your goal in applying for a new line of credit is to establish good credit and to build a positive payment history.
Step 1
Write down any of the information you might need to supply when applying for a credit card beforehand. In most cases, you will be required to give your social security number as well as the legal mailing address and telephone number for your current employer. You will also need to provide your monthly income, including wages from employment, benefits from disability or unemployment, and any other source of income.
Step 2
Sort through any credit card offers you receive to weed out those that appear to be scams. The Federal Trade Commission warns consumers that any credit card offer guaranteeing approval without any type of credit check is probably a scam you should avoid. Exercise caution with credit card offers that sound too good to be true.
Step 3
Request applications for secured credit cards. A secured credit card is one for which you deposit money into an account held by the banking institution issuing you the credit card. Your spending limit will not exceed the deposits that you make in the account. In fact, it is often less, generally averaging about 50 percent of the account balance. Choose a secured credit card company that reports to one of the major credit reporting agencies.
Step 4
Review the terms and fees associated with any secured credit card applications that interest you. Pay careful attention to any annual fees or monthly fees you have to pay. Look over the interest rates offered by different credit cards. Take the time to consider all the fees associated with a card so that you can choose the least-expensive option for rebuilding your credit.
Step 5
Submit an application for an unsecured credit card for people with bad credit. Although unsecured credit cards carry only minimal lines of credit, they can be helpful in reestablishing credit. Most unsecured credit cards have spending limits of no more than $200 or $300.
Step 6
Begin using the new credit card for which you have been approved. According to personal finance writer Liz Pulliam Weston, you should never use more than 30 percent of the available balance on a credit card. Make only small purchases each month that you can pay off in full by the due date for each billing cycle. Using a credit card regularly but wisely is one way to gradually rebuild your credit.
Tips and Warnings
- Do not get discouraged if you are not approved for a credit card soon after bankruptcy. It can take up to a few months to be approved for any type of credit card.
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