Credit Cards For People With Bankruptcy

Posted by CreditCardGuru

newspaper headline for bankruptcyQ: What are the best credit cards if you have had a bankruptcy? I’m worried none will approve me.

A: Going through a bankruptcy is stressful enough as it is. So don’t add to that stress by worrying about things you don’t have to – like getting approved for a credit card – because guess what? Getting one is easier than you think! Here’s what you need to know…

1. Some banks will cater to you (but most will not)

When it comes to credit cards for bad credit or bankruptcy, you will want to focus on banks that are specifically geared to people in those situations. That being said, some “regular” banks do offer secured cards for bad credit, but the majority of them don’t.

2. Secured credit cards are your best bet

With secured cards, you put up a security deposit and that amount becomes your credit limit. For this reason, practically anyone can get approved for one. In fact, there are a number of card issuers that offer guaranteed approval as long as you meet the basic requirements (like being a legal resident, 18+ years old, etc). These are the best credit cards for people with bankruptcy because your credit history will be irrelevant to the approval process.

On the other hand, unsecured credit cards will base their approval on your credit score and credit history. As you can guess, it’s next to impossible to get one with a recent bankruptcy (regardless of whether you have a chapter 7 or chapter 11).

3. Make sure the card issuer is legit

Most bankruptcy friendly credit card issuers you probably have never heard of before – that’s to be expected so don’t let it alarm you. After all, if it’ a bank that solely focuses on a card for people with a bankruptcy discharge, you would normally have no reason to do business with them.

That being said, watch out for the illegitimate companies out there. Some may not report your account to the three credit bureaus. Some may rip you off with excessive fees. So make sure you get your card from a legit company that is respected in banking world.

4. Don’t use a high percentage of your credit limit

I hear about so many people that get new credit cards to rebuild credit after a bankruptcy, only to overuse them. By that I mean using too high a percentage of the card’s credit limit.

A component of the FICO score formula takes into account what percentage of your credit limits you use. You may think using a higher percentage is better but that’s not the case. Why? Because the closer you get to maxing out your credit limit, the riskier you look… and your credit score suffers for it.

For this reason most personal finance experts typically recommend never using more than twenty to thirty percent of your available credit. So once you get your new credit card make sure you keep this in mind. For example, if you have a $1,000 limit, don’t use more than $300 of it at any given time.

5. After having a card 9 to 12 months, try for a better one

The inevitable drawback of credit cards for people with bankruptcy is that they charge fees. Some charge monthly fees, annual fees, maybe even a processing fee. It’s hard to avoid these – you should expect up to $10 to $15 a month on average. This is why you will want to move onto a better credit card as soon as you are able.

So after you have had your card for 9 to 12 months – managed it well and re-established your credit – you should start looking for something better, hopefully something with no annual fee.

Which card should you start with?

I would recommend trying out this tool to see if you have any card offers for your credit:

Written or last updated October 26, 2013

11 comments... read them below or add your own

  1. Matthew Hart February 3, 2014 at 8:25PM

    What if capital one was one of the creditors you had to file against?

    • bkgirl February 15, 2014 at 12:56AM

      I applied for this Capital One card one day after I received my discharge letter and was approved for a $1000 credit line. Also, I had very old Capital One cards in named in my bankruptcy as well as a brand new 2013 Kia and I was still approved for the card. :0) Best wishes.

  2. roadkill December 12, 2013 at 7:36PM

    Try applying for a credit card at capital one, i got my credit card just 1 month after finalizing my bankruptcy…i dont know if it was a fluke that i got my credit card approved, i doubt it. But i am thankful.

  3. Judy Lynn Chism February 7, 2013 at 4:05PM

    Please help me

  4. CMJ December 30, 2012 at 9:50AM

    I tried for a capital one credit card as suggested and I was approved. Shocker. So give it a try.

  5. Iris April 9, 2012 at 4:39PM

    I suggest to start with capital one. Try the regular one if not they will give u the opportunity to get a secured credit card. After having the card for 6 months they might give you a higher limit.

  6. joe March 17, 2012 at 9:20PM

    I got this card right after my chapter 13 bankruptcy in 07. Credit one bank. They will approve you with initial low limit, annual fee and high interest. Can’t complain. 1 year after I got Target store card. Low limit but I shop there a lot and never spend more than my limit. 2 years after I got a Firestone card. Good for car repairs, oil changes and tires. Firestone is geographically based. Could be totally different store where you live.

    These have done me well. Pay your bills and time will heal your credit. If you’re thinking of using a credit repair agency? I recommend against it since most are scams. I suggest finding a local law firm that repairs credit. Good luck and don’t give up there is hope.

    • Theresa lewis February 23, 2014 at 5:47PM

      I applied for a capitol one secure didn’t get a good respons well i’ll keep trying.thanks

  7. CM February 8, 2012 at 9:10AM

    This has been the most depressing decision I made, but I had no choice but to file. I had to do a Chapter 13 so quite a bit of my income is taken up with that. How do I apply for a credit with this situation? Just getting gas and groceries is an issue. Having a credit card would assist … I think.

  8. helen gaines January 18, 2012 at 9:54PM

    I have 6 months left in bankruptcy and am interested in applying for a credit card. I have no idea how to go a out the process.

    • CreditCardGuru January 26, 2012 at 7:00PM

      You will almost certainly have to start from the ground up and apply for a secured card. You can click on the link above to see my reviews of the best ones on the market right now.

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