When a person goes through bankruptcy it is common for them to feel like their options in terms of financial tools such as credit cards are severely limited. However, there is hope. Even if you went through bankruptcy, you can qualify for a new credit card after some time and you can even qualify for an unsecured one if you use the right company. This guide to frequently asked questions will help you to understand your choices for secured and unsecured cards after bankruptcy.
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What Is an Unsecured Credit Card?
To understand how to qualify, you first must know your options. Immediately following your bankruptcy decision, you can actually still get a secured card. It requires you to put a deposit down with the lender in order to insure your purchases should you fail to repay your bills. Generally, this deposit will range from $500-$1,000.
Once some time has elapsed, however, you can qualify for an unsecured credit card. This option is basically what many people consider a "typical" credit card. You are not required to leave a deposit with the bank or lender, but you are still responsible for repaying your purchases each month.
What Interest Rates and Fees Can I Expect?
When you decide to apply for a credit card after bankruptcy it is reasonable to expect that the interest rates the banks and lenders will charge will be higher than they are for those with good credit scores and no bankruptcies on their record. However, following the Credit CARD Act of 2010, these rates cannot be set too much higher than average and the fees are limited to late payment fees, over limit fees, and fees for returned checks. Therefore, you should not be charged any fees for the application or for its activation or anything else.
What Effect Will an Unsecured Credit Card Have on My Credit Score?
Many people who have been through the terrible process of bankruptcy are rightly concerned about the impact that any sort of credit card will have on their future credit score. If you hope to rebuild your credit in order to one day buy a home or a new car, then this concern is very valid. However, getting a credit card, whether it is secured or unsecured, can actually improve your credit if you use it correctly. Basically, through gaining access to a line of credit, using that credit and routinely, responsibly repaying the bills associated with that credit you are able to show lenders, current and future, that you are, in fact, a good borrower who has changed.
Looking Towards the Future
As you can see, though going through a bankruptcy can clearly be a traumatic experience, there are still options available to you as you move ahead. Both secured and unsecured cards are offered by banks and online lenders alike as a means to help you achieve a better financial future.