No one wants to declare themselves bankrupt. But for many, it is their only option. After being declared bankrupt, there is no reason why you cannot work to get a better credit score and obtain an unsecured credit card. It won’t happen overnight and there are a few things you should bear in mind when completing applications to give yourself a better chance of acceptance in the future.
Be cautious when applying to credit card companies
In the past you may have been inundated with offers of credit the second you were old enough to apply, however, providers now do a risk assessment. This is especially the case since the most recent recession. This could mean that you have to take out a secured card for a period of time to prove that you are creditworthy. You can also look for unsecured bad credit credit cards, but be aware that most of these cards have heavy fees attached to them. That’s why many consumers turn to secured credit cards, but if you don’t have any money for the security deposit, then the bad credit unsecured credit cards may be your best chance to start rebuilding your credit.
When you apply for a credit card after filing for bankruptcy. Your bankruptcy will have a big impact on whether you get approved or not. Realistically, reward, and cashback credit cards will be out of your reach. You need to look for subprime credit cards that will accept borrowers with past bankruptcies. Excessively applying to companies that require good to excellent credit will not only cause you to be declined but it will also negatively impact your credit score. Read the credit requirements BEFORE you apply!
Be credit smart
When you are approved for a credit card whether secured or unsecured don’t spend max out your credit limit because this will impact your future credit negatively. Instead, use the card in emergencies or to pay off small bills. Keep in mind your goal should be to be able to pay off your credit card to a $0 balance at the end of the month.
Don’t reapply to lenders that you owed before bankruptcy
The people you owed money too when filing for bankruptcy will be unlikely to want to lend to you again UNLESS you are willing to re-affirm the debt with them. Some people do this if they really want to keep doing business with that bank or finance company. But in general, it’s a good idea to steer clear of these companies.
How do I build my credit rating enough to get approved for unsecured credit?
Getting a better credit rating will depend on the length of time since bankruptcy, and your ability to prove you can keep up your payments. Getting a secured card or a poor credit unsecured credit card is the first step. Then make it a priority to pay on time and to pay off the bill at the end of every month.
Keep your debt to income ratio low, look for good opportunities to obtain credit. If you need a car loan, look for buy here, pay here car lots. Make sure they will report your payments to the credit bureaus. Having a nice mixture of loans and credit cards will help you build a good credit profile and improve your chances of being approved for unsecured credit in the future.