Monday, 30 November 2009

After Bankruptcy Credit Cards

Usually a person files for bankruptcy when he or she has no other means of paying the mounting debts. Many times debtors try to repay their debts through consolidation, but cannot handle the sheer amount of the debt. This leads to the debtors defaulting on the repayments and this can adversely affect their credit rating. So, the last resort for the debtors is bankruptcy.

However, this does not mean that all financial problems come to an end. There are many consequences of filing for bankruptcy. For instance, the person's credit score will come down by a massive 350 points and this makes them a credit risk. This means that person will find it very difficult to get a credit card after filing bankruptcy.

Before 2005, when a person applied for credit, his application was invariably denied as credit unions believed that bankruptcy was due to bad financial management and the person was too much of a credit risk to give him a card. The credit unions used to be worried that the person would refile bankruptcy to get out the debt trap once again. However, in 2005, after the bankruptcy laws were changed, it has become more difficult for people to refile bankruptcy as there is a waiting period before the next bankruptcy can be filed. This prompted credit unions to become less strict on issuing credit card to people who have credit problems.

Getting a credit card after bankruptcy is one of the best was of rebuilding your credit score. Once the court declares you bankrupt, you can apply for a secured credit after 6 months of the declaration. In this type of card, you would have to pay the credit union a certain amount of deposit to extend a line of credit to you. However, you would still have to make all the payments on time.

No doubt that secured credit cards have higher interest rates and annual fees compared to unsecured credit cards, but you should be looking for a card that does not charge you application fees. This way you would not have to pay for account opening, maintaining the account and other associated expenses which can add to quite a bit and your credit line will diminish without you having made any purchases.

Always pay off the monthly balance in full and do not leave anything for the next month. Make sure that your credit card company reports to the credit bureau that you are making all the payments on time. Also, make sure that the company does not put a notification on the card being secured when reporting to the credit bureaus.

After 12 to 18 months of making timely payments on your credit card, request the company to change the card to unsecured credit card. However, this is something that is dependent on the company's policies and is not a certainty.


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