Bankruptcies have a profound psychological impact on you that lasts a lifetime in addition to having an adverse effect on your finances and credit. However, you may gradually restore your credit score with help from banks and responsible spending.
After Chapter 7, you can apply for a credit card that is intended for those who are restoring their credit. Obtaining good credit is challenging since Chapter 7 bankruptcy affects your credit score for ten years. Such bankruptcy disqualifies a person from favorable credit choices.
Chapter 7: What is it?
In this bankruptcy, all obligations have been discharged. Your possessions will also be liquidated in order to pay off the debt. This fully settles any debts with your creditors. The benefit of this sort of bankruptcy is that you can reorganize your life once all of your debts have been settled and you are no longer liable to creditors. In this scenario, your credit score suffers greatly and is negatively affected for a considerable amount of time.
There are still some solutions available to those who are facing bankruptcy. They may apply for a secured credit card in your name or add themselves as an authorized user on someone else’s account.
Here are a few things you need to follow when applying for a credit card after filing for Chapter 7.
Get the bankruptcy dismissed
You must pay off all previous bad debts before applying for a credit card. In the event that your bankruptcy case is not successfully dismissed in court, you must obtain the judge’s approval before applying for a new credit card. In the event of Chapter 7, the period is four to six months after the first filing before the debts are discharged.
Verify your credit rating.
Although the bankruptcy entry will remain on your credit report for ten years, you can enhance your credit score in the future by acting responsibly and making your payments on time going forward. Your credit score can be gradually rebuilt if you utilize the credit card wisely. Yes, you are in a difficult position because you will not be approved for credit cards with strong rewards programs that can help you pay off bills rapidly.
Therefore, the best course of action in this situation is to apply for a credit card in order to raise your credit score. You must choose a secure card because the court might allow you to use one even if you recently filed for bankruptcy. Your credit limit on the secured card will typically be equal to the value of your security deposit.
Lenders of unsecured credit cards might not be as picky about your credit history or security deposit. This is due to the possibility that they may have excessive credit fees or that there may be undisclosed fees associated with the credit.
following receipt of the credit card
Continue working to raise your credit score even after obtaining a credit card. You will be able to obtain better credit cards as a result in the future. Additionally, you will qualify for better loans. Make sure there are records of your regular rent payments if you have rented a facility. Your credibility for future credit lines also grows if you report on-time rent payments. Create a thorough plan to pay off your debts and your upcoming bills on time. About 35% of your FICO credit score is determined by your payment history. Additionally, make an effort to keep your credit use low. Never feel the need to request an increase in your credit limit. Keep the credit card balance as low as possible. This is so that the credit card won’t have a favorable rate after Chapter 7. Furthermore, your money might serve as collateral. The best defense against increasing your credit utilization is one-time payments. Maintaining modest credit balances furthers this. You can save money on interest by having a modest credit debt, which is another benefit. When applying for a credit card after bankruptcy , you must look for pre-approval offers. After Chapter 7, obtaining a secured credit card can be difficult. Nevertheless, numerous credit cards for those with bad credit have been offered by reputable financial companies. This time, make sure you pay your debts on schedule.