Getting a Credit Card After Bankruptcy

Credit cards are such a big part of our day-to-day lives that living without one is almost unthinkable to many people. It’s the first question we get asked during many consultations: “If I declare bankruptcy, can I still get a credit card?”

The answer is usually yes, and for many people, a credit card can be a useful tool in rebuilding credit post-bankruptcy. But there are some important drawbacks to getting a credit card in the immediate aftermath of filing for bankruptcy, and you have to ask yourself if it’s the right tool for you.

Can you get a credit card after bankruptcy? Should you get one? In this article, we’ll look at some of the considerations and questions surrounding credit cards and bankruptcy.

How Long After Bankruptcy Can I Get a Credit Card?

Technically, most people can get a credit card immediately after filing for bankruptcy. You do not have to wait until discharge.

The process will vary depending on whether you file Chapter 7 bankruptcy or Chapter 13 bankruptcy.

How Soon After Chapter 7 Bankruptcy Can You Get a Credit Card?

You can apply anytime, but you should wait until after discharge, which is typically about three to five months after filing. The longer you can wait, the better the credit card terms will be.

The reason for this is that the discharge provides a “clean slate,” so lenders see you as a much lower credit risk, often resulting in better offers.

How Soon After Chapter 13 Bankruptcy Can I Get a Credit Card?

You may be able to apply for credit during the repayment plan, but you will need trustee approval. This is because while you’re on a court-supervised repayment plan, it’s the trustee’s job to ensure that any new debt doesn’t interfere with your plan.

To get approval, the trustee will want to see a track record of making your Chapter 13 payments on time. If the trustee does approve you, you will only be allowed a low spending limit, and the trustee might require you to pay it off in full each month. If you have missed or are late on Chapter 13 payments, the trustee will probably not approve a card.

Watch Our Video – Repairing Your Credit with Bankruptcy

For many people, declaring bankruptcy makes sense so you can start repairing your credit sooner. Check out our video to learn more about how bankruptcy can affect your credit:

Should You Get a Credit Card After Bankruptcy?

“Can you get a credit card?” versus “Should you get a credit card?” after bankruptcy is another important question to consider. While credit cards are extremely convenient for day-to-day life and can be a valuable tool for rebuilding credit, they may not be the right tool for you.

The biggest factor is that the financial terms are much less favorable after bankruptcy. High interest rates and low credit limits can make it easy to fall back into debt if not managed carefully. The primary goal of bankruptcy is to position yourself for long-term financial stability. Here are some key points to consider:

Interest rates: High interest rates can quickly accumulate debt if balances are not paid in full each month.
Timing: Credit cards obtained shortly after filing for bankruptcy will typically have unnecessary fees like setup fees, annual fees, and high late fees. Avoid these cards. Waiting a short time after bankruptcy will allow you to get cards without these extra fees.
Credit limits: High credit limits may tempt overspending.
Financial habits: Develop habits like spending only what you need and paying off the balance every month.

Tips for Getting a Credit Card and Using It to Rebuild Credit

If you do decide to get a credit card right after bankruptcy, it’s essential to use it sparingly and view it as a tool for your long-term financial health. Here are three absolute musts in that situation:

Make a plan: Initially, you may only qualify for cards with high interest rates and low credit limits. You may want to set limits on when you use this card. As you rebuild your credit, more options will become available.
Check your credit report: Make sure that everything is correctly reported. Errors happen more often than you might think.
Pay bills on time every month: Late payments are like shooting yourself in the foot. They’re an instant ding – and they cost you. Make sure you’re paying on time and set up an autopayment system if needed.
Watch your Credit Utilization Rate: Aim to use less than 30% of your credit limit, and even less if possible. Keeping the ratio of your credit line to credit balance low is a fast way to show lenders you can manage credit responsibly.
Make small purchases and pay the balance in full: To get even more specific, one strategy that works for many people is using their credit card for a single utility bill and paying it off on time every month, slowly building back your credit history.
Be cautious: After your bankruptcy, you’ll probably receive many credit card offers that promise easy approval. Lots of these offers are predatory. They have high setup costs, steep annual fees, and some even have monthly maintenance fees, which can quickly leave you back underwater.

For more information, check out these additional tips for improving your credit after bankruptcy.

Are There Other Options Besides Credit Cards?

Yes! If you’re hesitant about getting a credit card after bankruptcy, good news – there are alternatives for financing day-to-day life and rebuilding credit for the future.

Start with a secured credit card: A secured credit card requires a deposit, which serves as your credit limit. This allows you to rebuild your credit without the risk of debt. A secured credit card is the best tool many people have for starting to rebuild credit after bankruptcy.
Get a personal loan from a credit union: Some credit unions offer small personal loans specifically designed to help rebuild credit. Credit unions usually provide lower interest rates and more favorable terms than traditional banks.
Become an authorized user on someone else’s account: Ask friends or family if you can join their account as an authorized user. This will allow you to use a credit card in emergency situations without the high interest rates that post-bankruptcy credit cards often bring.
Credit builder loans: Many banks offer these small loans held in a bank account until the debt is paid off: It builds credit with manageable payments and demonstrates the ability to repay debt.

Is a Secured Credit Card a Good Alternative for a Credit Card After Bankruptcy?

Yes, for many people trying to rebuild credit after bankruptcy, a secured card is the best starting point. They work like a traditional credit card, but your card is pre-funded with a refundable security deposit. Secure credit cards are a powerful tool that was invented specifically to help people get back on a solid financial footing after a bankruptcy.

Here’s why they’re such a great option:

High approval rate: Your own security deposit funds the credit line, so banks are much more likely to approve the application, even if your credit has recently plunged after bankruptcy.
Builds positive payment history: Secured credit cards report your payments to the major credit bureaus, just like conventional cards. By making small purchases and on-time payments, you’ll gradually raise your credit score.
Built-in guardrails: The security deposit limits your spending and makes it impossible to accumulate an unmanageable balance. This helps you practice healthy credit habits without risk of falling back into debt.

What Do You Need to Know About Credit Cards After Bankruptcy?

Bankruptcy is a significant decision, and if you’re considering it, you probably have many questions, so be sure to check out our Bankruptcy FAQs.

Rebuilding your credit after bankruptcy is possible – you can even qualify for a home loan after bankruptcy in some cases – and there are various tools and strategies to help you along the way. The right credit card can help or hinder the process, so it’s important to know all of the facts and have a plan.

Ready to schedule a free bankruptcy consultation? Get in touch with us today. Our experienced Oregon & Washington bankruptcy law firm offers free consultations to discuss your options.

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