One of the questions I am most often asked by clients is how to establish credit after filing for bankruptcy. There are several ways, but the most important thing is to remember is how credit cards may have led you into bankruptcy in the first place.
Secured Credit Cards
The simplest way to re-establish credit is with a secured credit card. There are many different types, but all have the same idea. You deposit a sum of money with the bank, and the bank gives you a credit card in that amount. Your faithful payments on this account will appear on your credit report even though it is a secured card. However, there are many things to watch out for.
A secured credit card where you deposit $500 and get back a card with $450 of credit is probably not a bad deal as the bank can be expected to charge a fee for providing the card. Watch out for cards that take larger fees. I have heard of cards which will ask you to deposit $500 and give you back a card for less than $200.
After You Establish Credit, You Can Go Back to a Regular Card
With most cards, you can deposit additional sums to increase the credit available, and some cards will, after you have shown a good payment record, give you two dollars for every one dollar you deposit. After you establish credit and can get an unsecured card, you can close out the secured card.
To learn more about what secured credit cards are available, search the internet for information. If you type “secured credit card” into a search engine such as Google or Yahoo, the first results will be from web sites which will give you information on the cards and let you compare them.
After a while, as you try to establish credit, you will get offers for unsecured cards from second-tier credit card companies, generally meaning not from the big banks. Be careful with these as, again, there may be high fees involved.
Debit Cards May Work as Well…
If you have a bank account with a debit card, you can always use that card to make purchases that might require a credit card. It is usually necessary to have an actual credit card for some things, such as travel, car rentals and other things. It is always important to be careful with your new credit, especially so credit cards do not create the same problems that brought you to file bankruptcy in the first place.
Allan Bloomfield practices bankruptcy law in Forest Hills, Queens. Contact Allan today for a free consultation.