How to Get a Credit Card After Bankruptcy
Applying for a credit card after bankruptcy can be a tough test, even if it helps consumers build their credit score. Read the article to know about the options available.
Any form of credit can be difficult to obtain for people who have had to go through the unpleasant experience of filing for bankruptcy due to insurmountable debts. This is due to credit valuation and history being negative for many years, as a result of such a measure. In addition, the adoption of a few laws has created some confusion about the whole process.
Changes in the law
A change in the bankruptcy code in 2005 made it compulsory for consumers to wait a certain amount of time before applying under the same or another chapter. This law encouraged credit card companies to offer cards to consumers after a discharge. In May 2009, a new law called credit card holder ‘Bill of Rights was adopted.
Although it aims to protect consumers from unjustified costs, it imposed a number of restrictions on issuers. The new law led to card issuers cherry-picking new users because of their credit history. Individuals with a negative credit report had to pay higher associates and annual fees, and offered a much higher initial APR (interest rate).
Popular Options After Bankruptcy
It is important to note that former creditors’ credit points would have collapsed by 150 – 200 points as a result of leaving the same. A credit card can help build up its credit, since paying off the full amount on a monthly basis, will improve credit score in the long run.
The following options can be viewed after a bankruptcy discharge.
Secure Credit Card: Applying for a secure credit card is appropriate, as you can get one approved for as little as six months after discharge. It has a cash deposit which eliminates the risk for the issuer. It would be wise to pay off the entire bill amount out of improving your score. The best part is that most of these instruments can be converted into security 12 – 18 months if payments have been rapid. The cardholder should ensure that payment history is reported to credit bureaus on a regular basis.
Wage Deduction Card: A consumer can be approved for a wage deduction card, regardless of his / her credit history, since all purchases are made automatically deducted from the person’s salary over a period of 2 months. Low credit risk for the issuer leads to low transaction costs for the cardholder. They can contribute to the implementation of discipline on spending habits because the salary determines the credit limit. An additional function is that micro loans can be utilized without any issue costs.
Corporate Card: Employers can register their employees for the company’s credit card. Even checks are made by the issuer before approval, the payment is essentially the employer’s responsibility. Thus, an employee with bad credit can get approved for this card. However, they may not appear on the employee’s credit report. If they do, the employee’s report may be affected if the employer does not make payments on time.