Can I Apply for a New Credit Card Once I Have Filed Bankruptcy?
No law forbids you from applying for a new credit card while you’re going through bankruptcy, but common sense says that you likely won’t be able to get one. Why? Because the banks and other companies and institutions that issue credit cards likely will deny your application, deeming you a poor credit risk.
This is especially true if you file Chapter 7 bankruptcy that discharges virtually all your consumer debt, including credit card debt, at its conclusion. If you file Chapter 13 instead, there’s an outside chance that you may be able to get a new credit card while in bankruptcy, but you’ll need prior approval from the bankruptcy trustee or the court itself.
Reestablishing Credit After Bankruptcy
Your bankruptcy remains on your credit report for seven years. In addition, it can drop your credit score between 130-200 points. None of this bodes well for your getting a credit card with a favorable interest rate until well after your bankruptcy. However, you do have other credit card options that, if used properly, can cut this time down substantially. Some of these options include the following:
- Secured credit card: Also called a prepaid credit card, this is one tied to your bank or another account balance. You can charge things on this card up to the balance in the account you’re using as collateral.
- Low balance credit card: This type of card sets a cap, usually $250-$500, on the amount you can charge on it.
- High interest credit card: This type of card carries a higher interest rate than normal credit cards.
While none of the above is ideal, obtaining one of them may be your only viable option immediately after bankruptcy. The idea here is to charge small amounts on it each month and then pay the balance off in full, making sure your payments reach the company on or before the payment due date. After six months of doing this, you can ask the company to increase your limit or reduce your interest rate based on your sterling payment record. Many companies will do this, but only if you ask.
Believe it or not, obtaining a loan to purchase a new or used vehicle can also make it easier for you to obtain a credit card with a favorable interest rate. How? Again, it’s a matter of making your monthly car payments on or before the payment due date. This not only raises your credit score, but also establishes you as a responsible credit user who pays his or her bills on time. This will put you at a good standing when applying for a credit card.