Tips For Obtaining Unsecured Credit After A Bankruptcy
If you have applied for and received a bankruptcy discharge, you may be worried about rebuilding your credit score and history. While it is true that your credit score is going to take a rather large hit, all is not hopeless. It can take time to rebuild your credit history, but it is not as hard as some people would make it out to be. The biggest part of rebuilding your credit post bankruptcy is time, it will take time, upwards of 2 to 3 years if you work hard on rebuilding.
Ive had clients ask as to whether for not they would even be able to obtain an unsecured credit card following a bankruptcy. The answer to that is a resounding yes. In fact many credit card companies will send out offers to you without you even applying, post bankruptcy. The reason is that credit card companies love customers who have just emerged from a bankruptcy, the reasons being is that they can charge a higher interest rate and fees, just for giving you the privilege of using credit again. The second reason being that most people who declare bankruptcy will only do so once in a lifetime. Not only that, but you can only apply once every 8 years, so they do not need to worry about you cashing out on credit then receiving a bail out via chapter 7 anytime soon.
Following a bankruptcy you also have no debts. This means that your cash flow is free and clear, so the banks know you have the ability to repay your debts now. The only problem will be that the rates you will be offered will be rather terrible, and you will have lots of fees, including an annual fee in most cases, with few exceptions. Yet you do have to start over, and this is the route you will need to take if you ever hope to rebuild your credit again.
Your best bet is to work towards a relationship with one or two credit unions. Barring credit unions aim for a bank issued credit card versus a finance company, as credit union and bank accounts look better on your credit report. Your credit limits will be low at the start, but over time with on time payments and low balances, your credit limit will slowly rise. As long as you maintain a perfect payment history and keep looking for new accounts until you have 3 to 5 positive credit accounts listed on your credit report, your credit score will slowly rise. At about the 2 to 3 year mark you could be looking at a credit score of 700 or higher.
If for some reason you do not qualify for an unsecured credit card, you can opt for a secured credit card. This will mean putting up a deposit with the bank or credit card issuer. I always recommend doing it for at least $500 as the $300 ones have to low a credit limit. If you can afford to deposit $1000 for a secured credit card this will help you much more in the long run.
In the end it is up to you to rebuild your credit history. Yes you have a big hit to your credit score, that is only fair. It is like starting over again almost. The good news is you have a clean state to work with, now it is up to you on what you do with that clean slate.