Getting a Credit Card After Bankruptcy

Man choosing between multiple credit cards
© Huntstock / Creative RF / Getty

Many people avoid filing bankruptcy because they fear a scarlet letter “B” will bar them from getting credit ever again. While bankruptcy can deal a serious blow to your credit history, it also wipes your slate clean, relieving you from debt, and giving you a chance to start over. In fact, you’ll want to start over as soon as you’re ready, so you can begin rebuilding your credit

Creditors have different rules for approving credit cards for people with a past bankruptcy.

Getting a credit card after bankruptcy may not be as hard as you think.

How Bankruptcy Affects Your Credit

As you probably know, you have a credit report that contains a history of your credit accounts. Bankruptcy will go on your credit report and will stay for 7 to 10 years, depending on the type of bankruptcy you filed. If you had a high credit score when you filed bankruptcy, your credit score may drop several hundred points once the bankruptcy hits your credit report. Your credit score may not file as much if you already had a low credit score prior to filing bankruptcy.

Creditors will pull your credit report or credit score when you make a credit card application, but that may not bar you from getting a credit card.

Are You Ready for a Credit Card Yet?

Before you apply for a credit card, make sure you’re ready for the responsibility. You won’t be able to file bankruptcy again for several years, so if you get into credit card debt again, bankruptcy won’t be an option for relief.

Make sure you’ve corrected the bad spending habits that got you into debt. When you get a credit card again, you need to be disciplined enough to charge only what you can afford on your credit cards and pay your balance in full each month.

Check Your Mailbox for Credit Card Offers

Checking your mailbox is one of the simplest ways to get a credit card after bankruptcy.

Some credit cards issuers, knowing you can’t file bankruptcy again for several years, will send offers for their credit cards. These credit card offers are some of your best chances for getting approved.

If you previously opted-out of receiving pre-approved credit card offers, for example to cut down on junk mail, credit card issuers won't send you any offers because you've instructed them not to. You’ll have to opt-in again by going to OptOutPrescreen.com to start receiving offers from credit card companies.

Keep in mind, however, that pre-approved credit card offers don’t necessarily guarantee approval. You’ll still have to apply and go through the application approval process. If, by chance, you’re denied, the credit card issuer will send a letter letting you know the reasons your application was turned down.

Adjust Your Expectations

Don’t expect your first post-bankruptcy credit card, or maybe your first few credit cards after bankruptcy, to have great terms. Credit cards with rewards and low interest rates are reserved for consumers with excellent credit scores. If you’re diligent about rebuilding your credit, you’ll qualify for these types of credit cards eventually, but you'll have to prove your creditworthiness first.

Avoid applying for cards you included in your bankruptcy. These companies are more likely to deny your credit card application.

Make sure the card you choose reports to at least one of the three major credit bureaus, preferably all three. You want your credit card usage to go on your credit report so that you can begin demonstrating good credit habits.

Consider a Secured Credit Card

A secured credit card requires you to make a deposit against the credit limit. After bankruptcy, you’re more likely to get approved for a secured credit card because it’s less risky for the credit card issuer. Some secured credit cards may not approve you if you had a bankruptcy discharged within the past one or two years; read through the qualification criteria for any secured credit cards you’re considering to see if bankruptcy will prevent you from being approved.

A few secured credit cards to consider:

Your credit limit will be equal to your security deposit, so pay as much as you can for a credit limit. After several months of keeping your secured credit card in good standing, you may be able to convert your card to an unsecured credit card. Other credit card issuers may be more willing to approve you for an unsecured credit card.

Retail Credit Cards May Be Another Good Option

Retail credit cards – those offered by stores you shop – often have less strict approval criteria for applicants. You may have a chance to be approved for one of these credit cards. You’re more likely to be approved for a closed loop retail credit card, which is one that doesn’t have a Visa or MasterCard logo and can only be used in the retail store.

Know Which Credit Cards to Avoid

Many of the credit cards offered to applicants who recently filed bankruptcy have high interest rates and fees. While you may not qualify for the upper echelon of credit cards, that doesn’t mean you should accept just any credit card that will approve you.

Avoid any credit card with an extremely high interest rate or that charges high upfront fees. These credit cards aren’t the best option for starting over as they put you into debt before you ever receive the card in the mail. If, as a last resort, you choose one of the cards, pay off the fee right away before your statement ever arrives in the mail and pay your balance in full every month to avoid expensive interest charges.

While you may swear off credit cards because you don’t want to ever have to deal with debt again, you’ll need to rebuild your credit score if you want to finance a car or home. Credit cards are one of the best ways to do it. Charge only a small amount each month and pay your balance in full each month and, not only will you avoid getting into debt again, with time you’ll improve your credit score.