Can You Get a Credit Card After Bankruptcy? Yes - But Be Careful
TL;DR
Bankruptcy does not mean you will never have credit again. In fact, some people begin receiving credit card offers relatively soon after bankruptcy. The important question is not simply whether you can get credit—it is whether the new credit is affordable and helps you rebuild your financial life.
Credit Offers After Bankruptcy Are Not Unusual
One of my bankruptcy clients recently received a preapproved credit card offer at my office. It may seem surprising, but I regularly see clients receive credit solicitations after filing bankruptcy.
Credit card companies can use information from credit reporting companies to identify consumers who meet certain criteria and send them prescreened offers. Receiving a prescreened offer, however, does not guarantee final approval.
So, if you have filed bankruptcy and suddenly receive a credit card offer, the offer itself is not necessarily unusual.
Bankruptcy Does Not End Your Credit Life
A Chapter 7 bankruptcy can remain on a credit report for up to 10 years, but that does not mean you must wait 10 years before obtaining new credit. The Consumer Financial Protection Bureau specifically recognizes that certain credit cards and loans can be used to rebuild credit history.
The key is how you handle that new credit.
Paying bills on time, keeping credit-card balances manageable, and avoiding numerous new applications in a short period can help rebuild credit over time. There are no shortcuts, but responsible borrowing can gradually improve your credit history.
What About Buying a Home?
Getting another credit card and qualifying for a mortgage are very different things.
For example, under current Fannie Mae guidelines, a borrower generally must wait four years after the discharge or dismissal of a Chapter 7 or Chapter 11 bankruptcy before qualifying under the standard bankruptcy waiting period. A shorter two-year period may apply when documented extenuating circumstances exist. Other mortgage programs and bankruptcy chapters have different requirements.
A Fresh Start Should Be Used Carefully
Bankruptcy is intended to provide qualifying debtors with a financial fresh start. Getting access to credit again can be part of rebuilding, but there is no reason to accept an expensive credit card simply because it says “preapproved” or “platinum.”
Read the interest rate, annual fee, credit limit, and other terms carefully. The CFPB recommends paying bills on time, avoiding excessive credit utilization, and not applying for too much new credit at once when rebuilding credit.
If you are struggling with debt or considering bankruptcy, contact the Law Office of Louis S. Haskell at (978) 459-8359 to discuss your options.
This article is for general educational purposes only and does not constitute legal or financial advice. Individual circumstances vary.