Many people look to get credit cards after bankruptcy. They do so with good reasons. It could be they are looking for some spare money as they get back on their feet or just to rebuild a credit rating.
Whatever the reason it is possible and with careful management will build credibility back into your credit rating.
With recent economic events banks will carefully scrutinise any credit card application. But when you apply at least the law change of 2005 extending the time of filing between bankruptcy motions is in your favour. The extension of the times has made it less risky for banks to lend to you and they will consider a credit card after bankruptcy more favourably.
There are a number of options for getting a credit card after you have been adjudged bankrupt:
Payroll Deduction Cards
For this option you need to have a steady job and probably have been in employment for at least 6 months.
With this option a fixed amount is deducted from your pay check each pay.
The amount you can borrow is determined by your base salary.
Unsecured Credit Card
Generally harder to get than other secured cards. They are good for improving a credit rating but may have higher fees and interest rates than other cards. This is because the bank is taking more risk with a secured card than it is with this type of card.
When looking at this type of credit card try to find one with no setup fee, low annual fees and low interest rate.
It is considered good practice to pay outstanding balance off your card each month. If you can do this then the interest rate will not be so important to you.
Secured Credit Cards
These have traditionally been the cards used after bankruptcy. They were able to be issued at least 6 months after the judgement. They require a cash deposit which is used as the credit line for the account.
After a while, when the bank can see you have your spending and repayments under control they may extend you credit limit past that which was originally agreed.
As long as your bank regularly reports to credit agencies your credit score will improve as you display an ability to make regular payments.
These cards often have higher annual and establishment fees than other forms. Always look for a card which has no application fee if this is an option you wish to take.
Also look for a card which converts to an unsecured card in 12 months. This should reduce any annual fees.
Irrespective of the type of card you get, here are some suggestions for the management of your credit cards:
Never carry any due amount forward. Always the the entire card off each month.
Always pay on time
Satisfy yourself that the credit card company reports payments to credit rating agencies. If they don’t then your credit card score will not improve.
Don’t apply for too many cards at once. In fact the opposite should be your practice. Keep you credit card debt to a minimum, have on card only, and use other (cheaper) forms of credit for any borrowings you may need.
When in bankruptcy get a secured card. Never spend more than 25% of the credit limit and pay the account in full as soon as the bill comes in. Maxing out the card even if you pay it off each month is not good for your credit rating.