Post-Bankruptcy and Credit Cards

Finding credit again after bankruptcy is not as hard as you might think. Numerous creditors offer cards to consumers after a bankruptcy and may even prefer them as a target base. Why? Because these cards and lines of credit are often packed full of unfavorable terms and carry higher than average interest rates, meaning more money for the creditor.

The Right Card

It is easy to see that no two credit cards are the same, which is especially true for those who have less than perfect credit. What often happens after a bankruptcy is people jump into the first line of credit they are offered, feeling they will never have a chance at good credit offers. This is simply not true and anyone can work the system to find the best line of credit possible.

First, understand the type of credit you are looking for. A smart idea is to stay away from secured lines of credit for at least 6 to 12 months after a bankruptcy. Since these cards require an asset to be used as collateral against the loan, it is better to stick with a less favorable card that does not require you to put up any possessions at risk in the event of default.

Also, shop around for a card that has the best terms. In general, you are looking for the lowest interest rate and zero to limited annual fees, which may also come with a lower spending limit. However, the idea isn’t to charge a lot of debt right away, but to maintain a manageable balance over a year or more period.

Last, stay away from prepaid credit cards. These cards do absolutely nothing to rebuild your credit. While they can be helpful for managing money and avoiding penalty fees, they shouldn’t be used with the intent of repairing your credit. The only way to rebuild credit is through responsible borrowing, which isn’t possible on a prepaid card.