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What are your credit options after bankruptcy?

On Behalf of | Mar 15, 2024 | Bankruptcy

The fact that bankruptcy causes your credit score to take a hit may make you wonder if you have any shot of getting a new credit card following your bankruptcy. The truth is that you can, though you may have to explore your options carefully to obtain a new card.

Even if card issuers will not approve you for a new card, you may still be able to get access to credit for a period of time and rebuild your credit score so you can acquire a card in your name someday.

Apply for a secured credit card

Your chances of getting approval for a card may increase if you apply for a secured credit card. This kind of card requires a refundable security deposit, which typically becomes the credit limit. This deposit reduces the risk for lenders, making secured cards an accessible option for individuals with poor credit histories.

These cards often come with annual fees and high interest rates. Still, using this card provides you an opportunity to show you are responsible with borrowing and repaying money, helping to improve your credit.

Have someone co-sign with you

Finding a creditworthy co-signer can significantly increase the chances of getting approved for a credit card. The co-signer agrees to share responsibility for repaying the debt, which mitigates the risk to the lender. However, this option requires a friend or family member with a strong credit profile who is willing to put their credit reputation on the line.

Become an authorized user

If it is too difficult to obtain your own card, you might ask a relative or friend if you can become an authorized user on their card. The payment history of the account holder will reflect on your credit report, potentially boosting your score.

This option is not as effective in boosting credit since authorized users lack the primary responsibility for paying off debt. Still, it may help you establish some kind of credit history while you wait for better options to become obtainable.

Rebuilding credit after bankruptcy takes time and discipline. Applying for too many credit products simultaneously can result in multiple hard inquiries, which can further damage credit scores. The key is to start small and make timely payments so you can apply for your own credit card or another loan when your credit score has improved.