Bankruptcy and Credit Cards
Did you know that you can begin rebuilding your credit as soon as your bankruptcy is complete? It’s true that bankruptcy remains on your credit report for up to a decade and can lower your credit score by more than 200 points, but it’s equally true that you will still have access to credit. The trick is choosing the right credit cards and using them carefully.
Do I Really Need a Credit Card?
Credit cards are almost a necessity in the modern world. You can’t shop online, make airline or hotel reservations, or make some types of major purchases without a credit card. Getting a new card once your bankruptcy case has concluded can be one of the best ways to move forward after your bankruptcy. However, you’ll still need to use caution as you work to rebuild your credit.
Weighing Your Options
You might be surprised to discover that your mailbox is full of new credit card offers. You have a clean slate and possibly more disposable income than you did prior to the bankruptcy.
Before signing up for any card, you need to carefully read the fine print. Interest rates might be high at first. It’s not uncommon for post-bankruptcy card offers to start at 24 percent interest or higher. They also tend to have monthly fees, higher annual fees, lower credit limits and cancellation fees. You’ll also need to double-check that the lender will report your payment habits to the major credit bureaus because this is what will ultimately increase your score over time.
Unsecured vs. Secured Credit Cards
Unsecured credit cards are the most common type of card. When you use an unsecured card, the credit card company is essentially loaning you money at a predetermined rate of interest, which will continue to accumulate until the balance is paid off. Secured credit cards are cards that are attached to an account that is funded by your own deposits. The credit card company gives you a credit limit linked to your deposit, and you will need to pay off your balance every month if you don’t want to pay added fees or interest.
Because your own money is used to fund secured credit cards, these might be easier to access immediately after bankruptcy. The risk for creditors is low, but you can still benefit greatly in the form of a higher credit score.
Rebuilding Your Credit
Each on-time payment will help your credit score inch just a little bit higher. You can further strengthen not just your credit score but also your financial stability by charging only small amounts and paying your debt off every month. This reduces the risk of getting into debt-related trouble again and also gives you more control over your future.
At First America Law, our team can guide you towards the most effective, affordable cards so that you can rebuild your credit and strengthen your financial future. Call us today at 1-800-695-7674 for your free case evaluation.