Should I get a credit card after bankruptcy?

Read about the pros and cons of getting a credit card after bankruptcy.

After you file bankruptcy, you'll probably get multiple credit card offers in the mail. In fact, you may even get some while you're still in your bankruptcy case. Having a past bankruptcy doesn't mean you should never have another credit card again, and having a credit card can actually help you rebuild your credit. Whether you should get a new credit card depends your ability to repay the debt and your ability to use the card responsibly.

A Post-Bankruptcy Credit Card Can Help You Rebuild Credit

The main reason you should obtain a credit card after a bankruptcy is to start rebuilding your credit. Most people don't have good credit when they initially file bankruptcy, and your credit will take a hit as soon as you do file. To repair that damaged credit, you need to show that you can handle credit responsibly. One of the easiest ways to do this is to obtain a new credit card, use it for small purchases and pay it on time every month. The credit card company will report your good behavior to the credit reporting agencies, which will cause your credit score to increase over time.

(For more articles on rebuilding credit after bankruptcy see our area on Rebuilding Credit.)

Can You Afford to Make Credit Card Payments?

Many people who file bankruptcy, particularly Chapter 7, do so because they have no money to repay any of their debts after paying their necessary expenses. Once you obtain your bankruptcy discharge, you are no longer responsible for most or all of the debt you had when you filed bankruptcy. (Learn more about bankruptcy and the bankruptcy discharge.) To a credit card company, this makes you an attractive option, because now you theoretically have disposable income - and that's why the offers roll in. But be cautious; look at the budget you prepared for your bankruptcy case. Do you really have the income to make credit card payments if you use it? If not, you might have to wait until your circumstances are better.

Can You Use a Credit Card Responsibly?

Creating a budget and sticking to it is very important at all times, but it's especially important after a bankruptcy. If you filed bankruptcy because of too much credit card debt, you might need to take a step back, be honest with yourself, and figure out if you're ready for a new credit card. Ask yourself these questions:

  • Can you keep yourself from using the card just because you have it?
  • Will you use the card to buy things you can't afford, or will you use it in place of cash and pay it off at the end of every billing cycle?
  • Can you save enough money every month to pay more than the minimum payment?

The bottom line is that obtaining a credit card after a bankruptcy will help rebuild your credit, but only if you use the card responsibly. If you can't afford the card or if you don't feel like you have sound financial judgment, hold off until you know you can handle it, or you could end up back in bankruptcy court in later years.

For tips on shopping for credit cards and using credit cards wisely, see our Banking & Credit Cards topic.

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