Q: I recently filed for bankruptcy. How long must I wait before I start over and apply for a new credit card?
A: Not long at all. Just don’t expect to get an American Express Platinum right out of the gate. After your bankruptcy is discharged, you can qualify for many secured cards almost immediately. One consumer reported getting approved for a secured card only a month after her bankruptcy. Cards like the Capital One Secured MasterCard would be a good choice to start off with. It will take a little longer, probably a year or two, to start qualifying for unsecured cards with decent interest rates.
If you don’t know a lot about secured cards, they work this way. You pay a certain deposit, say $500, and then the credit card company will allow you to charge up to that amount. Sometimes your credit limit will be higher than your security deposit, but with many secured cards, it’s the same number. You may be wondering why you would give a company money to let you borrow your own money. It’s pretty simple. The main reason people use secured cards is to build up credit so that they can qualify for other credit in the future. They can also be useful for a hotel stay or a car rental, both of which often require credit cards.
It’s usually a good idea to get a secured card after bankruptcy, as long as you feel that you can use credit responsibly. Just make sure that your choice reports to the credit reporting agencies. (The card mentioned above does.) If you see yourself needing a credit card or wanting to take out a mortgage or car loan in the next couple of years, now is the time to start building up your credit, and you can’t do that if they don’t report your on-time payments. Once your credit score climbs back up into the 600 range, and you’ve put the bankruptcy a year or two behind you, you should be able to start qualifying for unsecured cards with better rates.