Filing for bankruptcy is one of the most difficult financial positions you could possibly be in and can leave you feeling demoralized and humiliated. After all, a Chapter 13 bankruptcy can stay on your credit report for seven years and a Chapter 7 bankruptcy will be there for up to ten. This will impede your ability to apply for loans and credit cards more than the average person, but it doesn’t mean you have to wait a decade to apply for a new credit card. There are plenty of ways to apply for credit responsibly and in a way that will help you rebuild your credit.
Secured Credit Cards
One credit card every person who has filed for bankruptcy should apply for is a secured credit card. These cards are tailor-made for rebuilding bad credit for a couple of reasons:
- You use your own money as collateral, making them extremely low-risk.
- Given their low-risk nature, they are easy to apply for.
When you are approved for a secured credit card, you will have to pay a deposit usually $500 or $1,000. This acts as your credit limit, meaning you can’t spend more than the amount of money you put down for your deposit. Essentially, you are pre-paying your credit card. While secured cards don’t usually offer rewards or cash back, this kind of setup is advantageous for those who have recently filed for bankruptcy. Credit card companies will not be put off by your credit history because you pay the entire maximum balance ahead of time. This means they get their money before you even use your card, ensuring no risk for them. For you, having a low credit limit means that you can’t drive yourself into debt with this kind of card. This encourages responsible spending habits.
Credit Builder Loans
Credit builder loans operate like traditional loans in reverse and are another option designed specifically to help build credit. Instead of receiving your full loan amount and paying it back, these loans take your payments first and then deposit the loan amount after your final payment. Like secured cards, this payment structure is low-risk, meaning your credit history won’t matter as much to the lender. Since they still report your payments to credit bureaus, you get to build credit back up in a low-risk scenario and will get a lump sum once you finish.
Filing for bankruptcy doesn’t mean the end of your financial life. Look for secured credit cards and other ways to help you rebuild your credit. A lawyer, like a Chapter 7 bankruptcy lawyer from Pioletti Pioletti & Nichols, can help you figure out how to rebuild your credit after filing for bankruptcy.