How Soon After Bankruptcy Can I Get a Credit Card?

Bankruptcy can be a traumatic event that, unfortunately, many Americans go through. While many people may assume bankruptcy is due to poor spending habits or bad credit management, it can also happen as a result of a long illness or major injury, job loss, or foreclosure. Declaring bankruptcy offers a way for people to go to federal court and get out from under their debt while still making sure creditors get a fair deal as well.

There are two main types of consumer bankruptcy: Chapter 7 and Chapter 13. With a Chapter 7, also called a liquidation bankruptcy, your debt is wiped out — but in return, you’ll have to sell some of your property and use the proceeds to pay back some of the debts. There are some things that are exempt — such as the car you use to get to work, or your farm equipment that helps you make a living. Not all debt can be counted in a Chapter 7; student loans in most cases, child support obligations, and non-income-related tax debts aren’t able to be discharged in the filing.

In a Chapter 13 bankruptcy, also known as a reorganization, you can keep all of your property, but you agree to abide by a three- to five-year payment plan out of your discretionary income. How much you’ll pay depends on your income, total debt owed, and the value of your property..

As you can imagine, after a bankruptcy your credit report will take a huge hit; in fact, you’ll be denied most types of credit for several years. You can, however, come back from a bankruptcy, with time and effort, and even get a credit card.

Getting a Credit Card After Bankruptcy

While getting a credit card is certainly more difficult after a bankruptcy, it’s not impossible. In fact, you may receive credit card offers immediately following the discharge of your debt. These will be high-interest cards, however, and if you don’t manage them appropriately you could find yourself back in financial trouble very quickly.

If you do choose to accept one of these high-interest cards, such as First Premier’s Gold Card or Credit One Bank’s credit builder products, you’ll need to ensure you pay the balance off in full each month. That will help your credit score increase rapidly — as well as help keep your debt utilization ratio under control.

If you’re finding it hard to get approved even for this type of card, you could ask a family member or close friend if you can be an authorized user on their card. Even if you never use the card, their good payment history will help you rebuild yours. You could also try applying for credit cards that allow co-signers.

Keep in mind, however, that if you’re an authorized user on someone’s card—or even if they’re a co-signer or joint owner — if they run into financial trouble and can’t make the payments then you’ll be negatively affected all over again. They may also not want to take on the risk of having you on their credit card account, and you should be prepared for that as well.

Getting a Secured Credit Card After Bankruptcy

Even if you’re not able to get an unsecured card, there are plenty of secured cards on the market that can help you rebuild credit, and they’re relatively easy to get – even after bankruptcy. A secured credit card requires a cash deposit; the amount of your deposit becomes your credit line. These typically have high interest rates, but your security deposit on the card makes lenders a bit more comfortable approving you for a card because if you default on payments, they’ll still get paid.

If you’re finding it difficult to get approved for a secured card through a bank, try your local credit union. Sometimes they have easier requirements, and you can get a secured card if you have a checking account with them. Check with the individual credit union to see if they have a time requirement for how long ago your bankruptcy occurred.

How Long Bankruptcy Affects Your Credit

The short answer for how long a bankruptcy will stay on your credit report is generally 10 years. The good news is that the longer it has been on your credit report, the less it affects you. If you have a bankruptcy that’s several years old and you show excellent payment history afterward, that’s a good sign you’ve turned things around and are on your way to being less of a credit risk to lenders.

Bankruptcy doesn’t have to ruin your credit forever. You have options — and some of them can be taken advantage of right away.