Applying For Credit Cards After Bankruptcy (2024)

Bankruptcies are often considered a “worst-case scenario,” as they can have long-lasting effects on your finances and credit. But it’s not the end of the world. Anyone can rebuild credit after suffering bankruptcy by applying for a credit card designed for people with poor or bad credit. With responsible spending and on-time payments, you’ll watch your credit score rise again.

How Long After Bankruptcy Can I Get a Credit Card?

The amount of time it takes to get a credit card after bankruptcy can depend on a few factors. It could take several years to qualify for a card again.

Let’s review the types of bankruptcies and what each means for your credit.

The Type of Bankruptcy Counts

There are two basic types of personal bankruptcies:

• Chapter 7:This is where all of your debts are eliminated and any assets you own that are not exempt will be sold off and used toward paying your debts. This will wipe out what you owe your creditors and anything you own of any value. Chapter 7 allows for a fresh start, as once the bankruptcy is discharged or completed you’ll no longer have any liability to creditors. Your credit score will be severely damaged.
• Chapter 13:With this type of bankruptcy, your debts are restructured, which means you and the creditors come to an agreement over how much of the debt you will repay within a time frame of three to five years. Any remaining portion of your debt is forgiven. Although this type of bankruptcy is less damaging to your credit, it still carries a strong negative effect.

A Bankruptcy Must Be Discharged Before You Can Apply for a New Card

You cannot apply for any new lines of credit—including a credit card—while your bankruptcy proceedings are in progress without court approval. The amount of time it takes to settle and complete your bankruptcy proceedings will determine when you can apply for a credit card.

A Chapter 7 bankruptcy takes approximately four to six months after the initial filing to be completed and your debts discharged. After that, you can apply for a credit card.

A Chapter 13 bankruptcy, however, can take between three to five years as it’s a restructuring of your debt that you pay off over time. Only after you’ve made your last payment will your bankruptcy be discharged. Until then, you’ll have to receive approval from the court.

Credit Card Eligibility

Regardless of which type or specific circ*mstances, filing for bankruptcy will have a lasting impact on your credit score. A bankruptcy will show on your credit report for a significant amount of time. A Chapter 7 bankruptcy will stay on your credit report for 10 years and a Chapter 13 will remain on your report for up to seven years.

With a less-than-stellar credit score, responsible use of a credit card can help rebuild your score. It may feel like a catch-22, since even after approval you likely won’t qualify for many cards like those offering rich rewards or premium perks.

The best move regardless is to apply for a card designed for someone rebuilding credit. A secured card is ideal for this purpose and even with a fresh bankruptcy you may be able to receive approval. With a secured card, the credit limit you receive is typically equal to the amount of the security deposit you put down.

A handful of unsecured card issuers won’t check your credit score or may be willing to extend a line of credit even to someone with a blemished credit history. These cards typically come laden with fees and sky-high rates, so be careful to check while shopping. Secured cards from major issuers tend to have lower costs.

After Getting a Credit Card

With your new card, the work to improve your credit doesn’t stop. If you focus on improving your credit score you may eventually qualify for better credit cards and see more favorable rates on other types of loans, like car loans, mortgages or student loan payments.

Credit Card Strategies After Bankruptcy

There are several steps you can take to get on a path towards better credit:

1. Make sure to pay your bills on time every month. Payment history is the single biggest factor affecting your credit, accounting for approximately 35% of your FICO Score.
2. Make a plan to pay off your existing debts. The amount of total credit you use as a percentage of your credit limit also weighs in at 30% of your score, making it a worthy goal to keep your credit utilization low.
3. Consider programs that count alternative payment behavior. It may be worthwhile to sign up for something like Experian Boost, a free program that counts your payment behavior from a linked checking account you use to pay your utilities, cellphone and video streaming media plans. Or use it in conjunction with American Express’ FICO Score Planner, a free tool available through the issuer’s MyCredit Guide.. This tool maps out a blueprint of credit-building actions to help you achieve a better credit profile over time.
4. Get a credit-builder or secured card and use it responsibly. As you build a history of good payment behavior, your credit profile will continue to improve.
5. Be patient. Rebuilding credit takes time and effort. While your credit score may not rise right away, it can happen steadily over time as you practice responsible spending habits.

Credit Cards To Apply for After Bankruptcy

Credit card options do exist for those recovering from bankruptcy. Each has its benefits and drawbacks, so consider each carefully before applying. Check for preapproval when available before submitting your application.

Keep in mind credit cards designed for cardholders with poor credit typically have higher APRs than cards aimed at those with good or better credit. You can avoid paying interest by spending responsibly and paying off your balance in full every month.

Discover it® Secured Credit Card

The Discover it® Secured Credit Card is designed for people looking to rebuild credit, making it a good choice for anyone recovering from bankruptcy. As it is a secured card, it requires a deposit of at least $200, which becomes the credit line. Deposits are refundable if you pay off your balance in full and close the credit card account (or upgrade to an unsecured card after a period of responsible credit management).

Other perks include:

• $0 annual fee
• 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases
• Credit activity reported to three major credit bureaus
• Ability to apply for preapproval

Capital One Platinum Secured Credit Card

Capital One’s Platinum Secured Credit Card is promoted with a “rebuilding credit” level, meaning anyone who has defaulted on more than one loan may qualify.

The Platinum Secured card requires a deposit to establish a credit line as with most secured cards. But only a small deposit of $49, $99 or $200 is needed to earn an initial credit line of $200 depending on the terms of your offer.

Other perks include:

• $0 annual fee (rates & fees)
• No foreign transaction, replacement card or authorized user fees
• Ability to check for preapproval without a hard credit pull

OpenSky® Secured Visa® Credit Card

No matter how rough your credit history may be, OpenSky, a credit card company owned by Capital Bank, offers a secured credit card that may be available to you. The OpenSky Secured Credit Visa card doesn’t require a credit check, so your credit score doesn’t matter for approval.

A small refundable deposit of at least $200 is required to open the account. There aren’t any rewards to note, but the Visa card can be used for all types of purchases. On the downside, this card charges an annual fee of $35.

Other perks include:

• Visa network benefits, like fraud protection and worldwide acceptance
• Reports to major credit bureaus

Credit One Bank® Platinum Visa® for Rebuilding Credit*

The Credit One Bank Platinum Visa for Rebuilding Credit is another possible option for rebuilding credit after a rough bankruptcy. It’s especially attractive if you’d rather not have a secured credit card that requires an upfront deposit.

Credit One Bank will likely perform a hard credit check to determine your credit line based on your creditworthiness. The minimum credit line is $300, and there’s potential for credit line increases after a period of responsible spending habits.

Keep in mind Credit One Bank’s Platinum Visa has a steep annual fee of $75 for the first year. After that, $99 annually (billed as $8.25 monthly). This may still outweigh the benefits of making an upfront deposit, but as a deposit may be eventually refundable, perhaps not.

Other perks include:

• Cash-back rewards on eligible purchases
• Ability to apply for preapproval

Bottom Line

If you’ve filed for bankruptcy, don’t panic. There are ways to rebuild a solid credit standing over time using secured and unsecured credit cards. When you’re ready to start applying for a credit card, check for any preapproval offers so you know if you’re likely to be approved for a card. Always read a card’s terms and conditions before completing a formal application. Look out for fees, minimum deposits, whether or not the issuer reports activity to credit bureaus and how much time is needed before being eligible for an upgrade to a better card. Most importantly, be patient as good credit isn’t built overnight.

Frequently Asked Questions (FAQs)