Applying for a credit card after going through a bankruptcy can present certain hurdles. Your credit is at an all-time low, banks are wary of lending you money, and money, in general, is tight.
Hope is not lost; far from it. Many have been there before you and many more will come. And even though it may seem counterintuitive, one of the best ways to rebuild your credit is by opening a brand-new credit card. When you know how to get a credit card after bankruptcy you’ll be able to obtain credit and start rebuilding your credit quickly.
Banks, credit unions, and legitimate lenders of all kinds know that bankruptcies happen for a million different reasons and responsible people like you need to rebuild their credit.
One of the ways banks do this in order to ensure they don’t lose money is by issuing what’s called a secured credit card: you pay a security deposit upfront, and this amount usually becomes your spending limit. As long as you make payments in full and on time, your credit will begin to grow.
Some banks, however, will not issue any kind of credit card to someone with a bankruptcy in their recent history, not even a secured credit card. But there are almost always credit cards you can qualify for.
Indeed, there are actually mainstream unsecured credit cards that people with poor credit can qualify for. The trick is knowing when to apply for a card and which cards to apply for. Always keep in mind that the effects of a bankruptcy wear off over time. The longer you wait before applying, the more likely you will be approved.
Below are a few of the best credit cards bankruptcy, both secured and unsecured, for people ready to rebuild from a bankruptcy using credit cards.
Best Secured Credit Cards After a Bankruptcy Discharge
As mentioned above, a bank or credit union requires a down payment when you open a secured credit card. In essence, these cards act like prepaid cards, but every payment made is reported to the three credit bureaus which will improve your credit with all three of the credit reporting companies. This means there is almost no risk for banks and, as long as you make your payments, your credit improves.
Here are a few of our favorite secured cards that you’ll have a good chance of being approved for, no matter what state your credit is in:
Capital One Secured Mastercard
A good, solid first card, the Capital One Secured Mastercard requires no annual fee, has a regular rate of 26.99%, and security deposits can be made in the amounts of $49, $99, and $200 (Capital One picks the amount of the deposit, not the applicant).
If you keep up with the payments on this card for six months, you’ll automatically be considered for a higher line of credit. With its regular reporting to the three credit bureaus, you’ll already start to see the numbers on your credit reports climb in less than a year.
- 25-day grace period: if you’re ever late on a payment, you have 25 days after your payment was due before interest begins to accrue.
- No foreign transaction fee: for those who regularly travel internationally for business or leisure, this is almost a necessity.
Discover it Secured Card
A perfect credit card for folks needing to build up their credit who also like perks, the Discover it Secured Credit Card requires no major fees. Like other secured credit cards, you pay the security deposit (there’s a $200 minimum) and are free to use it.
Unlike many other cards, though, there are no annual, monthly, or processing fees. For folks looking to leverage their secured card mostly to improve their credit, this is a great feature when money is tight.
Not only that, the Discover it Secured card offers some of the best rewards of any secured card on the market. On the first $1,000 you spend, you’ll earn 2% cash back at participating restaurants and gas stations. All other purchases earn 1%, rates that well above other secured credit cards.
- First-year cash back: almost unheard of for a secured credit card, the Discover it card offers to double the cash back you earn during the entire first year of your account. So not only is this card great to repair credit, it’s a great way to save.
- Access your FICO score for free via your monthly statements. Knowing your credit scores is key to a healthy financial future and this card makes it easy.
OpenSky Secured Visa
The OpenSky Secured Visa Credit Card distinguishes itself not because it offers great perks or has a low annual fee; what earns this card’s spot on this list is that it does not require a credit check. Yes, you read that right. That means you can apply for this card at any point in your bankruptcy proceedings and you will most likely be approved.
There is a $35 annual fee to keep the card open, and you will need to pay a $200 security deposit before opening the card. This card does not offer any gas, grocery, or other points. But it is an excellent choice if you don’t want another inquiry into your credit history.
- $25 credit limit change fee: during the first year you can increase your security deposit, and thus your spending limit, to $3,000 for free. This can help as a higher spending limit that is managed responsibly reflects positively on your credit reports. Starting the second year, there’s a $25 fee every time you want to add to your security deposit.
- 3% foreign transaction fee: if you travel overseas often and need a card to use, this is a bad option, making every transaction you make 3% more expensive.
Best Mainstream Unsecured Credit Cards After Bankruptcy
After a bankruptcy, you may be surprised to find yourself still receiving offers for regular unsecured credit cards in the mail. Don’t be fooled, however; unlike before your bankruptcy, these companies most likely will not approve you and the offers are probably coming in because your address is stuck on a mailing list.
Applying for one of these cards early in your bankruptcy recovery will prompt a hard inquiry into your credit history and lower your credit score. That’s the last thing you need.
Believe it or not, however, there are a handful of legitimate unsecured credit card companies that will approve folks with poor credit. And the great thing about these cards is that they feature a pre-qualification process that lets you know if you’ll be approved before you even apply, and this pre-qualification process has no impact on your credit score.
Indigo Platinum Mastercard
This card is for people with bad credit who would like to and can responsibly use a card for everyday spending. They accept credit scores as low as 500 (a rating of Poor, but still not as low as Bad), and depending on other items in your credit reports, you may even qualify for no annual fee. Having a bankruptcy on your credit reports is not a problem. The qualification process is quick and as mentioned above, it has no impact on your credit score.
As can be expected with an unsecured credit card that accepts bad credit, this card doesn’t offer any frills or perks. If gas or grocery points or other perks are important to you, you will generally have better luck looking at secured credit cards.
- Credit limit starts at $200 and only goes as high as $300 (although it can go lower if the card is mismanaged and late fees accrue).
- 1% foreign transaction fee: some cards don’t charge this fee at all, but this card charges a relatively low fee.
Milestone Gold Mastercard
If you’re determined to build back your credit with a mainstream credit card, the Milestone Gold Mastercard is another strong option. Just like the Indigo Platinum Mastercard, the qualification process for this card has no impact on your credit score. Having a previous bankruptcy on your report is fine, but they do prefer a credit score of 500 or above.
There are a few variations of this card, and you can expect to pay an annual fee of $39 to $99. Be extra careful with payments on this card, as each late, over-limit, or returned payment incurs a fee of $39 each time (not to mention the hit your credit score will take).
Depending on your income and other current financial factors, however, this could be a very robust card and a useful tool to have when rebuilding your credit.
- 25-day grace period: you have 25 days after your payment was due before interest begins to accrue.
- The annual fee can rise each year, so it’s not a good idea to hold this card for too long.
When You Can’t Get a Card After Bankruptcy of Your Own
If you find yourself unable to qualify for even a basic secured credit card there is still an option available to you.
If you’re close to a family member with good credit and you feel comfortable with it, consider asking them to become what’s known as an “authorized user” on their credit card.
They will notify their bank that you will not only be using the card, but you’ll also be making payments on the card. And these payments, even though the card is not in your name, will show up as positive entries on your credit reports.
Any (or all) of these options is an important step that will help you on your road to recovery from bankruptcy and help improve your credit.