Written by: Ashley Fricker
Edited by: Lillian Guevara-Castro
Some of life’s setbacks can be impossible to overcome. Fortunately, bankruptcy is not one of them. In fact, for many people in extreme debt, bankruptcy can actually be the first step to repairing your credit for two important reasons:
- Bankruptcy can reduce or wipe out your debt. Since you now have less (or no) debt, you are in an excellent position to repay the next debt you take on.
- Creditors know you will be willing to pay high interest rates to rebuild credit, and many are happy to offer you their products, which are often the most profitable for the bank.
There are several ways to restore your credit rating after bankruptcy. For example, credit unions offer credit builder loans that can rebuild your credit rating over the course of a year or two. The most feasible method is usually to obtain a credit card, secured or unsecured, and use it responsibly.
After six months or so, you should see your credit score start to improve. Keep reading for a selection of what we believe to be the best post-bankruptcy credit cards available today and learn how to use these cards for a fresh start and a fresh credit score.
Unsecured | Secured | Post-Bankruptcy Advice
Best Unsecured Cards For After a Bankruptcy
An unsecured credit card is one that is not backed by a cash deposit. Even if you are just coming out of bankruptcy, you may be able to procure an unsecured card, but be prepared for a high interest rate, high fees, and a low credit limit. But that’s OK; consider it the price of regaining your credit rating.
We’ve evaluated just about every unsecured credit card geared toward those consumers who need to rebuild their credit ratings, and here are some of the best:
- Up to $1,000 Initial Credit Limit
- See if you Pre-Qualify with No Impact to your Credit Score
- Less than perfect credit? We understand. The Surge Mastercard is ideal for people looking to rebuild their credit.
- Unsecured credit card requires No Security Deposit
- Perfect card for everyday purchases and unexpected expenses
- Monthly reporting to the three major credit bureaus
- Access to your Vantage 3.0 Score from Experian (when you sign up for e-statements)
- Use your card everywhere Mastercard is accepted at millions of locations
- Enjoy peace of mind with Mastercard Zero Liability Protection for unauthorized purchases (subject to Mastercard guidelines)
| Application Length | Interest Rate | Reports Monthly | Reputation Score |
|---|---|---|---|
| 5 minutes | 35.90% Fixed | Yes | 8.5/10 |
- Greater access to credit than before - $700 credit limit
- Get a Mastercard accepted online, in store and in app
- Account history is reported to the three major credit bureaus in the U.S.
- $0 liability* for unauthorized use
- Access your account online or from your mobile device 24/7
- *Fraud protection provided by Mastercard Zero Liability Protection. If approved, you'll receive the Mastercard Guide to Benefits that details the complete terms with your card.
| Application Length | Interest Rate | Reports Monthly | Reputation Score |
|---|---|---|---|
| 8 minutes | See terms | Yes | 9.0/10 |
- Now with higher credit limits
- Increase your access to available credit
- Higher limit than before, still no security deposit required!
- Greater access to credit than before
- Less than perfect credit is okay
- Mobile account access at any time
- Account history is reported to the three major credit bureaus in the U.S.
| Application Length | Interest Rate | Reports Monthly | Reputation Score |
|---|---|---|---|
| 3 minutes | 35.9% | Yes | 9.0/10 |
Your strategy should be to pay off your balance each month to avoid interest charges. Avoid tapping more than 30% of your available credit limit to maintain a healthy credit utilization, and never miss a payment due date.
Best Secured Cards For After a Bankruptcy
A secured credit card requires you to deposit funds in an account that acts as collateral for your card balance. The deposit is usually equal to or greater than your card’s credit limit, and you can’t withdraw the deposit unless you either decide to close the credit card or are upgraded to an unsecured card.
You might choose a secured card if you can’t qualify for an unsecured one or if you want to pay a lower interest rate than that charged on unsecured cards. These are our three top picks for a secured card:
- Credit Builder is a secured credit card
- Using Credit Builder can build your credit history
- Limit risk of overspending by setting your own limit with money you move into the secured deposit account.
- Chime Checking Account required to apply for the Credit Builder Card
| Application Length | Interest Rate | Reports Monthly | Reputation Score |
|---|---|---|---|
| 5 minutes | N/A | Yes | 9.5 |
- Have you Received your Tax Refund? Apply for First Progress today to Take Charge of your Financial Goals!
- Earn 1% Cash Back Rewards with First Progress Prestige!
- Apply now and fund your security deposit over 90 days with the option to make partial payments.
- You Can’t Rebuild credit with a Debit Card. Try First Progress Today! ¹
- Build your credit history across 3 major credit reporting agencies: Equifax, Experian and TransUnion.¹
- All credit types welcome to apply!
- ¹Cardholders who keep their balance low and pay their credit card bill on time every month typically do see an increase in their credit score.
| Application Length | Interest Rate | Reports Monthly | Reputation Score |
|---|---|---|---|
| 8 minutes | 14.24% (V) | Yes | 7.5/10 |
- New feature! Earn up to 10% cash back* on everyday purchases
- No credit check to apply. Zero credit risk to apply!
- Looking to build or rebuild your credit? 2 out of 3 OpenSky cardholders increase their credit score by an average of 41 points in just 3 months
- Get free monthly access to your FICO score in our mobile application
- Build your credit history across 3 major credit reporting agencies: Experian, Equifax, and TransUnion
- Add to your mobile wallet and make purchases using Apple Pay, Samsung Pay and Google Pay
- Fund your card with a low $200 refundable security deposit to get a $200 credit line
- Apply in less than 5 minutes with our mobile first application
- Choose the due date that fits your schedule with flexible payment dates
- Fund your security deposit over 60 days with the option to make partial payments
- Over 1.4 Million Cardholders Have Used OpenSky Secured Credit Card To Improve Their Credit
- *See Rewards Terms and Conditions for more information
| Application Length | Interest Rate | Reports Monthly | Reputation Score |
|---|---|---|---|
| 9 minutes | 24.64% (variable) | Yes | 7.0/10 |
The nice thing about a secured card is that the deposit is refundable — you can’t say the same for the annual fees and other fees charged by unsecured cards.
Restoring Credit After Chapter 7 or Chapter 13 Bankruptcy
Chapter 7 bankruptcy liquidates your debt, but you may lose most of your property in the process. In a way, Chapter 7 cleans the financial slate, although the black mark remains on your credit report for many years.
Chapter 13 bankruptcy reorganizes your debt, which means you are expected to pay back at least some of it. In return, you get to keep your property.
Under Chapter 13, secured credit cards receive preferential treatment over unsecured cards, which means you have to pay off your secured cards first, along with other collateralized debts, like your home and car loans. Here are some tips for restoring your credit after bankruptcy:
- Review your credit reports: You can get free copies of all three reports once a year on AnnualCreditReport.com. Go through each one to find any mistakes, which you can rectify by following the procedures set out by each of the credit bureaus. You can also add comments to explain your side of any issues.
- Open one or two credit accounts: We’ve mentioned credit building accounts from credit unions and secured/unsecured credit cards. Even if you are allowed to open multiple accounts, go slow — the credit bureaus will mark you down for opening too many accounts all at once. Be scrupulous about making your payments on time every month.
- Pay down debt: If you underwent a Chapter 13 bankruptcy, pay down your leftover debts as quickly as possible. The sooner you repay them, the sooner your credit rating will begin to recover. For new credit cards, don’t pay the full balance each month; rather, pay down your balances on a rolling two-month schedule. Sure, you’ll be paying interest, but you’ll also be restoring your creditor’s confidence in your creditworthiness.
Credit cards are a primary tool for restoring your credit rating following a bankruptcy. The cards we’ve listed in this article will provide you with the best deals and the greatest access to credit. Use your cards responsibly, and over time you’ll reestablish your financial reputation.
Photo credits: totaldebtnet.com
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