Can I Apply for Credit Cards After Declaring Bankruptcy?

Dear GSP,

Yes, you can apply for credit cards after going through bankruptcy, although it may be difficult to qualify for the kind of credit cards you want. After bankruptcy, you will almost certainly have to pay higher interest rates and other fees, if you qualify at all especially if your bankruptcy was recent.

You didn't mention which chapter of bankruptcy you filed. The two most common types of bankruptcy that appear on a consumer credit report are Chapter 7 and Chapter 13.

Chapter 7 bankruptcies are normally discharged quickly, around three months after they were filed.

With a Chapter 13 bankruptcy, you are responsible for paying back a portion of the debt that you owe. Since Chapter 13 bankruptcies have debt repayment plans that can take several years to be completed, you may find that you need to apply for new credit before the bankruptcy has been discharged.

You should consult your attorney regarding any legal restrictions around applying for credit after declaring bankruptcy. Generally, the lender must determine whether you qualify for a particular credit card or other type of loan while the bankruptcy public record appears in your credit report.

Be Cautious When Applying for New Credit Soon After Bankruptcy

While it's a good idea to begin trying to re-establish credit after bankruptcy, you should be cautious. Even if you are in a better financial position now, high interest credit cards can lead to growing debt if you don't manage them carefully.

If you do open an account with a high interest rate or one that has other fees associated with it, charge only small amounts and pay the balance off in full each month. Plan ahead to cover things like annual fees that may be added to your credit card balance. The key to rebuilding credit is to have an open, active account with a history of on-time payments. You do not have to carry a balance from month-to-month to build your credit.

A Secured Credit Card Can Be a Good Tool for Rebuilding Credit

Another option to consider is applying for a secured credit card through your local bank or credit union. With a secured credit card, the lender requires you to deposit a certain amount of money into a savings account to guarantee or "secure" any amount you may charge on the account, up to the credit limit.

Just like a regular credit card, you can then charge purchases on the account and make payments. Keep your purchases small and make sure all payments are made on time. Ideally, you should pay the balance in full every month. Using the account responsibly will help you begin rebuilding credit, and in time, the lender may be willing to convert the account to a traditional unsecured credit card.

Keep in mind that some lenders may not report secured credit card accounts to the credit reporting agencies, so you should inquire about this in advance. If they say they don't, ask whether they will report the account if it is converted to a regular credit card account in the future.

Good luck, and try not to be discouraged. Rebuilding your credit history after bankruptcy can take time, but as long as you practice good spending and payment habits, it is possible.

Thanks for asking,
The "Ask Experian" Team