Bankruptcy can damage a person’s credit. However, rebuilding it over time is still possible. Having good credit is in any consumer’s best financial interest. Even if they have a low score, there are plenty of ways to get back on top. One of the simplest ways to do so is by responsibly using a credit card.
Contrary to popular belief, people can still get credit cards after filing for bankruptcy. But the cards they can get may have different rules and restrictions.
Sub-prime credit cards can be an option
Those with a low credit score can often get what’s called a sub-prime credit card. These cards usually require a security deposit equal to the balance limit.
However, consumers should watch out where they get them. According to a recent report, some issuers can be predatory and hit consumers with unnecessary fees.
In some cases, those who’ve filed for bankruptcy can get unsecured credit cards, but they may come with unfavorable interest rates.
Tips for responsible use
Rebuilding credit takes consistency, commitment and hard work. By doing the following over time, those who have filed for bankruptcy can get back into good financial standing:
- Only spend the allotted balance: Sub-prime credit cards can have a lower balance threshold than others. While this isn’t always helpful or convenient at times, being responsible can make things easier in the long run.
- Save for emergencies: As bankruptcy can reduce or eliminate burdensome debts, some may want to consider putting the money they saved into emergency savings. While the goal is to have at least 3 to 6 months of expenses, any amount for a rainy day is acceptable. That way, people don’t have to rely on their credit cards if they face the unexpected.
- Pay on time: Credit card payments make up more than 30% of a person’s credit score. FICO places substantial value on credit cards because they’re considered “revolving” credit, meaning consumers can continue spending after payments are made. That’s why full and timely payments on card balances can help recover a damaged credit score.
Bankruptcy can provide consumers with a fresh start. And while the decision to file is never an easy one, an experienced attorney can help guide their clients through the process.