What Are the Best Credit Cards After Bankruptcy?
It is a myth that you cannot get a credit card after bankruptcy. However, any card you get will likely have some of the worst terms of any credit card account, and some creditors may try to take advantage of the fact that you might have nowhere else to go. Sometimes the best card may be any you can get to start rebuilding your credit history.
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Secured Credit Cards
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A secured card is one of the most popular choices after bankruptcy because banks rarely reject an application for one. This type of account requires the borrower to put down a deposit on the credit line, and the card issuer always charges an annual fee, which could be a few hundred dollars. Thus you should shop around for a card that charges an annual fee of less than $50 and returns your deposit if you ever close the account.
Department Store Credit Card
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A department store credit could be an option if you want an unsecured credit card, because they have far lower credit requirements than an unsecured account from a national bank. You generally only need a full-time job, bank account and debts that do not consume more than 35 percent of your income. Since you likely wiped out much of your debt in bankruptcy, there is a good chance you have a low ratio of debt to income.
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Tip
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You always want to get a credit card that uses a major payment network, such as Visa, MasterCard or American Express. Creditors want to see borrowers hold a credit card from at least one major national bank, and the credit scoring formula rates credit cards from a major bank higher than those from a department store. This is why secured cards are often the best card after bankruptcy. Most national banks offer one, and they eventually extend an unsecured line after several months of on-time payments.
Warning
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Narrow down your search for a credit card after bankruptcy to a few choices. Every credit card application requires a hard inquiry into your credit that dings your score a few points. Any more than five or six inquiries in a 12-month period makes the past bankruptcy look much worse. Also, check the annual fee and credit limit before applying for a card. A high annual fee will take up most of the limit on a low-limit card and dramatically raise your credit utilization rate, which is your credit card balance divided by your limit, a significant factor in the "amounts owed" part of the credit score calculation.
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