There’s no two ways about it: Nothing is going to ding your credit score harder than filing for bankruptcy. But after you declare bankruptcy, you need to start thinking about how you’re going to get your credit score back to where you have access to credit products.
This can actually happen a lot sooner than you think. You’ve been at the bottom. Now it’s time to get yourself back together.
While you might be understandably afraid of getting a credit card after bankruptcy, learning from your mistakes and using credit responsibly in the future is the name of the game.
Start With a Secured Card
A secured credit card is how many people build their credit from scratch. It’s also how many people who have had trouble with credit in the past start building it back up again.
Here’s how secured cards work, and why they make sense when your credit is iffy: You put down a deposit with your bank, say $500, and that deposit acts as your credit limit — meaning you spend money against the deposit, eliminating most of the risk for the bank.
Unlike a prepaid ATM card, you make payments every month, and your bank will report your payment history to the three credit bureaus, reestablishing your demonstrated ability to responsibly use credit. Generally speaking, after about six months to a year of responsible use, your lender is going to refund your deposit and bump you up to using a regular credit card.
A secured card is great for two reasons: First, basically anyone can get one. Second, it’s a sort of “training wheels” version of a credit card. You can wade back into the waters of using credit without worrying that you’re going to get back into debt. In the absolute worst-case scenario, you forfeit your deposit and your credit takes yet another hit.
But that won’t happen. Because you’ll make your payments, and get upgraded to a regular card again.
Credit Card Offers in the Mail
Because it’s going to be at least the better part of a decade before you can declare bankruptcy again, some lenders see you as less of a risk and are more than willing to offer you new lines of credit. You probably won’t be wanting for offers — in fact, many people who have declared bankruptcy are inundated with credit card offers in the mail.
The problem isn’t getting credit card offers, it’s sorting through them and finding one that has favorable terms. You need to look at the APR, the fees, and other charges that you’re going to be paying, as well as the benefits.
When evaluating offers for a credit card after bankruptcy, it’s best to walk before you can run. Sit back and evaluate as many offers as you can before you start filling out those credit card applications. It will give you some time to get used to having plastic in your pocket again.
General Credit Repair and Maintenance
To get good credit offers in the future, you’re going to need to do a little bit of credit repair and maintenance. For starters, make sure that everything actually got discharged from your credit report. Those old demons could be dragging down your credit when they no longer should be. More importantly, address the structural issues in your finances and spending behavior that caused you to take on more debt than you could handle in the first place.
From there, the main game is just making sure that you’re paying your credit card bills on time, and not getting in over your head. There are other options, like credit builder loans, to help you get your credit score back on its feet. But the heavy lifting is going to be done by paying your credit card bills on time and keeping the overall amount of debt that you have low. If you can do that, you can get your credit score back into a respectable range — and probably sooner than you think.