Be careful when applying for credit cards post-bankruptcy
When attempting to rebuild your credit following a bankruptcy discharge, debtors should remain cautious of credit cards.
When people file for bankruptcy, it can damage their credit report and score for up to 10 years following the discharge of the debt. People may emerge from a bankruptcy free from medical expenses, credit card bills and other exhaustive debts; however, their ability to apply for financial loans, purchase a home or obtain certain types of credit cards may be significantly lower than people who have not filed for bankruptcy. Fortunately, there are ways that people can improve their credit score post-bankruptcy and rebuild their credit report. One way to do this is to apply for a credit card that is specifically designed for people who are trying to repair their credit scores following a bankruptcy. People who do this should be cautious and aware of the dangers that these cards may bring.
Applying for credit cards
Traditional credit card companies accept applicants who have healthy credit scores that show they are able to repay their debt. This means that the financial lender has a relatively low risk of losing money. There are credit companies that cater to clients who have low and/or damaged credit scores. People who have filed for bankruptcy have the best chance of receiving one of these credit cards as opposed to those cards that require applicants have high credit scores.
A person can improve his or her credit score by obtaining a credit card and paying the amount due on time every month. A relatively safe and conservative way to obtain use of a credit card despite recent bankruptcy is to apply for a secured credit card from a bank. To use a secured card, the cardholder deposits money in the bank and then can use the credit card up to the limit of the amount of money deposited. The money secures the debt, so the bank is willing to extend the credit because its risk is protected by the deposit, which it has the right to keep if the debtor defaults on the credit card debt.
Beware of high interest rates and fees
Since subprime credit cards lend money to people with poor credit scores, they often charge annual fees or have a higher interest rates than other credit card programs. According to CBS News, subprime companies accepted over 48 million credit card applications from people who had credit scores of 600 or below.
Although making regular payments on these cards can help to strengthen a damaged credit score, people who fall behind on their payments may become trapped with extensive debt, high interest and other fees. Furthermore, people who have had their debt discharged through bankruptcy cannot file for bankruptcy again for a certain period of time. Subprime companies earn at least 58 percent of their profit from charging these fees, which may include processing fees, authorized user fees, maintenance fees and annual fees.
Financial help when you need it
Whether you are trying to pick up the pieces of your life following a bankruptcy discharge, or you want to explore your debt relief options, it may help to speak with an attorney in New York. A lawyer who is experienced in bankruptcy cases will listen to the details of your case and help you explore your legal opportunities.