Many people who would otherwise benefit from bankruptcy hesitate to file due to concerns about their ability to get a credit card. Contrary to common misconceptions, it is generally possible to get a credit card after filing for bankruptcy. Keep reading to hear Philadelphia bankruptcy lawyers explain how Chapter 7 and Chapter 13 bankruptcy affects your credit score, how long bankruptcy stays on your credit report, and how you can rebuild good credit and get a credit card after bankruptcy.
How Does Bankruptcy Affect Your Credit Score?
Many people have asked our Chapter 7 bankruptcy lawyers and Chapter 13 bankruptcy attorneys the questions, “What will my credit score be after a Chapter 7 discharge?” or “What will my credit score be after a Chapter 13 discharge?” While the answer is different for everyone, you should be prepared for the bankruptcy to initially – but not permanently – have a negative effect on your credit score. On the other hand, your credit will also continue to be negatively impacted by allowing your debts to continue growing. Filing for bankruptcy can improve your credit in the long run by wiping out your liability for most of your debts, which gives you more financial freedom and flexibility to start fresh.
Getting back to the original question, the extent to which bankruptcy affects your credit score negatively depends on your overall credit profile. According to FICO score data, bankruptcy may cause a drop in your credit score that ranges anywhere from approximately 130 to 200 points. These figures may be slightly higher or lower for some debtors.
Generally speaking, the lower your credit score currently is, the less it will be impacted by bankruptcy. For someone with a higher credit score, the drop may be more significant. The good news is that you can take steps to rebuild credit gradually over time – even while the bankruptcy is still on your record, which is generally up to seven years (for Chapter 13 bankruptcies) or 10 years (for Chapter 7 bankruptcies).
How to Get a Credit Card After Bankruptcy in Philadelphia
Even with a bankruptcy on your credit report, it may still be possible to qualify for a credit card. While all lenders have different policies – each considering a wide array of factors that are more complex than simple assessments of a credit score – a general rule of thumb is that the more time has elapsed since your bankruptcy, the easier it is to get approved for a credit card. It is also easier to get a credit card after the bankruptcy discharge, as various lenders have policies against credit cards for applicants with pending bankruptcies.
One of the best types of credit cards to get after a bankruptcy is something called a “secured” credit card, because secured credit cards were specifically designed for the purpose of helping people improve their credit. To obtain a secured credit card, you’ll need to make a minimum deposit – generally a few hundred dollars, but sometimes significantly less – which then equals your line of credit. For instance, if you were to make a minimum deposit of $300, your line of credit would be $300.
By making timely payments on a secured credit card, you can begin rebuilding credit right away. It will also help to pay all of your monthly bills in full and on time. The more your credit improves, the easier it will become to qualify for a credit card, and the more financial options you will have. Our Delaware County Chapter 7 lawyers can help you understand the steps to take during and after bankruptcy to rebuild your credit faster.
There are many credit unions and local banks in Philadelphia that may be willing to provide credit cards to people with low credit scores. Some possible options to consider include the following. Keep in mind that since fees, minimum deposits, and APR rates are subject to change, it’s a good idea to contact the bank or local credit union to ask questions and get more information in advance.
- Philadelphia Federal Credit Union Secured Visa Card
- APR – 20.99%
- Minimum Deposit – $300
- Annual Fee – $35
- American Heritage Federal Credit Union Platinum Secured Mastercard
- APR – 15.90% or higher
- Minimum Deposit – $300 (maximum $40,000)
- Annual Fee – $35
- Capital Bank Open Sky Secured Visa Card
- APR – 17.5%
- Minimum Deposit – Varies
- Annual Fee – $29
- CapitalOne Secured Mastercard
- APR – 22.9%
- Minimum Deposit – Ranges from $49 to $200
- Annual Fee – $29
Philadelphia Bankruptcy Lawyers for Chapter 7 and 13
While bankruptcy can initially have negative consequences for your credit score, or your ability to obtain a credit card, it can simultaneously be the first step toward good credit in the future. Most people find that they are able to achieve higher credit scores after declaring bankruptcy, because so much of their debt burden has been lifted. With credit card debt, medical debt, and other types of debt out of the way, it will be easier to make payments on time and build better credit going forward.
To learn more about how bankruptcy can help you eliminate credit card debt in Philadelphia, learn more about the other benefits of filing for bankruptcy in a free legal consultation, or to find out whether Chapter 7 or Chapter 13 could be right for you, call the Montgomery County Chapter 7 lawyers of Sadek & Cooper Law Offices at (215) 995-2543 today.