Rebuilding your credit after bankruptcy

One of the most common reasons that Georgia residents resist filing for bankruptcy is the fear of what such a filing will do to their credit score. And that fear is not unfounded: bankruptcy generally causes your credit to drop, especially if it is a Chapter 7 filing which involves the discharge of your unsecured debts.

However, what many people fail to realize is that a credit score decrease is not permanent by any means. While it may take time for your credit to recover, it will happen eventually. In the meantime, there are a few things you can do to boost your credit and ensure that you are spending responsibly in the wake of your bankruptcy.

Ironically, many lenders are more willing to issue credit cards to people who have just gone through bankruptcy than those that simply have a negative credit score. This is because bankruptcy laws forbid filing for bankruptcy within a specified amount of time after the discharge of debt in bankruptcy. Therefore, there is less risk to lenders.

That being said, the goal of applying for credit cards right after bankruptcy should not be to get back into debt. You should be very deliberate about how you sign up for and use new credit cards. For example, Wells Fargo offers a secured Visa card which allows users to track their expenses and protect their checking accounts from overdrafts. The card requires a $300 minimum security deposit and a $25 annual fee, but you may be able to convert to an unsecured credit card (and get your deposit back) if you have success with the secured option.

In addition, you may want to consider prepaid credit cards in the place of debit cards or checking accounts. This will help you to closely manage your money and ensure that you don’t go beyond your means.

Source: Fox Business, “Best Credit Cards After Bankruptcy,” Curtis Arnold, April 9, 2012