Although bankruptcy can have a long-lasting impact on your money and credit, the good news is the world is not going to end. By applying for a credit card made for those with bad or poor credit, anyone can restore their credit after filing for bankruptcy. Your credit score will increase once again if you manage your expenditure and make your payments on time. We will discuss in detail about types of bankruptcies, how bankruptcy affects your credit along with easy ways of getting a credit card after bankruptcy. Let’s begin!
Types of Bankruptcy
For the majority of consumers, there are 2 types of bankruptcies:
- Chapter 7
- Chapter 13
Chapter 7 Bankruptcy: With a few notable exceptions, like student loans, unpaid child support, and IRS debt, Chapter 7 will remove the majority of debt with no repayment necessary.
Chapter 13 Bankruptcy: Chapter 13 is a debt restructuring program also known as a "wage-earner" plan. Based on your disposable income (in accordance with strict IRS criteria) and the total amount of debt you have, this type calls for some payback over time.
How Does Bankruptcy Affect Your Credit Score?
The main factor affecting whether, how much, and at what interest rate you receive credit is your FICO credit score. You can borrow more money at a lower interest rate if your score is higher. Your credit score may suffer a severe decline as a result of filing for bankruptcy. If a lender accepts your credit application despite your poor credit score, it's probably on less enticing terms.
Regardless of your FICO score, certain lenders will not extend credit to anyone who has filed for bankruptcy. If you are experiencing problems acquiring credit following a bankruptcy, it may be a smart idea to sign up for a secured credit card to build your credit.
How to Get a Credit Card After Bankruptcy?
Before you can apply for any new credit, your bankruptcy must be discharged in federal bankruptcy court; the bankruptcy notation does not have to be removed from your credit report; it only needs to be discharged. No matter what chapter is filed, the bankruptcy will significantly harm your credit score. Checking your credit report and credit score should be your first step in obtaining a credit card after bankruptcy so that you are aware of where you are when looking into the eligibility requirements for various cards. Follow these simple steps to apply for secured credit cards:
- Find a secured credit card issuer
- Compare secured credit cards and choose an issuer who reports to the three credit bureaus
- Apply for a secured credit card
- You can apply for a secured credit card in person at a nearby bank or credit union branch, but the majority of big banks also let you do so online. Your application will be examined by the card issuer to see if you satisfy the conditions for approval. You'll have to give your: Social Security Number, Name, Address, and Income information about employment
Why is a Secured Credit Card the Best Way to Build Credit After Bankruptcy?
Your finest option while searching for the ideal credit card is probably a secured credit card, which necessitates that you make a cash deposit.
The main benefit of secured cards is that, in comparison to unsecured cards made for persons with bad credit, they typically feature cheaper interest rates and fees. Low borrowing limits on secured cards, which limit the kinds of purchases you may make, are their biggest drawback. Low spending limitations can, however, also be viewed as a benefit when you're trying to repair your credit after bankruptcy because it can be quite simple to pay off your debt in full each month. For those with bad credit, the borrowing limitations on unsecured cards are sometimes limited as well. But now some great cards like Zolve Azpire Credit Builder Card are available with no minimum deposit, no interest rate, and hidden fee. It's wiser to go for an easy-to-get this card to rebuild your credit.
How Can I Apply For a Secured Credit Card After Bankruptcy?
There are no differences between applying for an unsecured credit card and one that is secured. Since the majority of big banks only verify your credit score and make no other questions about your credit history or report, the process is quick and easy. Here is a simple step-by-step guide to applying for Azpire Secured Credit card:
- Firstly, by using your email address and password, register for the Zolve account
- Complete the Azpire Credit Builder Card application. Upload the required documents as requested. You'll have access to a checking account and a credit-building card
- Snap a selfie as soon as you get your credit builder card to activate it.
- Lastly, make transactions
- Relax now Zolve will help you to build good credit by notifying your transactions to credit bureaus
Even though applying for a secured credit card is a straightforward process, there are a few considerations that must be made.
Credit Limit: It is crucial to watch out that you don't over your credit card limit. Start with a lesser credit limit and only raise it when you can afford to pay off the balance in full at the end of the month. It does not follow that you must spend the entire amount you invest. Banks will keep an eye on your spending patterns, so if you have a solid payback history, they may be able to provide your credit card a set amount of money without requiring a deposit from you.
Eligibility: For a secured credit card, each bank has its own set of requirements. Other banks require you to open a fixed deposit in the bank, and the amount in the fixed deposit serves as the collateral required by the bank in case you are unable to pay your debts. While some banks have a minimum deposit requirement for cards, other banks require you to open a fixed deposit in the bank.
Benefits: Researching different secured credit card options and which ones would benefit you the best is crucial. You can get a variety of discounts and offers on secured credit cards that are identical to those on unsecured cards.
How Long After Bankruptcy Can I Get a Credit Card?
While your bankruptcy case is pending, you are not permitted to apply for any new credit lines, including credit cards. When you can apply for a credit card will depend on how long it takes to settle and end your bankruptcy proceedings.
After the initial filing, it typically takes four to six months for a Chapter 7 bankruptcy to be finished and your debts eliminated. You can then apply for a credit card after that.
However, a Chapter 13 bankruptcy, which involves reorganizing your debt and paying it off over time, can take three to five years. Your bankruptcy won't be declared discharged until you've paid your final installment. You will need the court's consent up until that point.
After knowing how to apply for a credit card after bankruptcy, your focus should be to improve your credit score. It's essential to apply for new credit, but you also need to have a strategy for using it wisely. Make sure to establish good habits with your new card, such as paying your bills on time each month and maintaining a low amount. It's better to choose a secured credit card like Zolve Azpire Credit Builder Card with zero interest rate and no hidden charges so that you don’t feel any additional financial burden while getting a credit card after bankruptcy.
Frequently Asked Questions
How getting a credit card after bankruptcy can build credit?
If you use your credit card wisely once you're approved, your credit score will gradually rise. Make sure, for instance, that you pay your credit card account each month early or on time. For the greatest outcomes in the interim, try to maintain your credit utilization below 30%. This entails keeping a balance of $3,000 or less for each $10,000 of credit that is readily available to you.
How soon after bankruptcy can I get a credit card?
Before you may apply for a new credit card, your bankruptcy must be completely wiped. Your debt will likely be dismissed in four to six months if you apply for chapter 7 bankruptcy. It will take three to five years if you file for chapter 13 bankruptcy.
How long after bankruptcy can I get a credit card?
After bankruptcy, you can usually attempt to raise your credit score over a period of 12 to 18 months. If they take the correct actions, the majority of people will experience some improvement within a year. Bankruptcy cannot be taken out of your credit report unless it was added in error.
Can I declare bankruptcy on my credit card?
Involving credit card debt in a bankruptcy filing is true. It is not advised to file for bankruptcy if your only debt is credit card debt, as there are better debt relief options, such as debt settlement.