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Should you get a credit card after declaring bankruptcy?

You got in over your head with debt, and a lot of it was due to your credit cards. You're thinking of declaring bankruptcy to get a fresh start.

If you do, though it may seem counter-intuitive, it may be wise to get a credit card after you file. Not only can you do this, but it can be a positive step.

The problem is that bankruptcy will lower your credit score. If you do nothing, it stays low. You have to take positive action to raise it, and that often means getting a credit card and paying it off each month. That shows lenders that you are reliable. After all, with your debt gone, you may be in the best financial shape you've enjoyed in a long time.

You may not qualify for typical cards, but you can often get secured cards. These require a cash security deposit. That ensures the lender that the risk is small. They report each monthly payment that you make, helping to raise your credit score.

Moreover, a lot of lenders don't look at credit cards as much of a risk in the first place. After all, they can limit you at $1,000 and know they won't lose more than that. You may not be able to get $40,000 for a car or $200,000 for a house, but the risk at $1,000 is minimal. You can then use the card to rebuild your credit until you can afford other loans.

As you move through the bankruptcy process, make sure you know exactly what legal steps to take to help secure your future.

Source: The Motley Fool, "Credit Cards After Bankruptcy," Jordan Wathen, accessed Jan. 22, 2018

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