The question that bothers many people after they have been declared bankrupt is whether anyone will ever trust them with their goods and services. It is possible to obtain credit after bankruptcy and gain the confidence of former as well as potential creditors by following a few simple steps. It may not be easy, but it is possible.

It begins by believing in your self and knowing that no situation is permanent no matter how bad it may look. It is true that bankruptcy robs you off your financial credibility, but remember that there is no situation that is permanent. Rebuilding your credit is determined by the small little things that you are going to do from now hence forth.

You can begin by making sure that you pay your bills on time without failure. No matter how small the amount seems, be sure to pay it on time and do not let it accumulate. Remember that this is probably how you ended up being bankrupt in the first place.

One simple way is to make your budget and stick to it through thick and thin. Operate on a cash basis and if possible, make it your policy to ‘pay cash today, for credit come tomorrow.’ If you must really get a credit card, make sure it is insured. This way, you will be out of trouble the next time you are unable to pay your debts. Better be safe than sorry. This way you can be assured of getting credit after bankruptcy.

Rebuilding credit after bankruptcy could prove to be be quite a challenge for some people, especially since most of them have already lost the trust of their creditors. The ability to rebuild your credit worth and trust will greatly be determined by the little actions that we sometimes think do not count. For example, make it your habit to pay your monthly bill on time no matter how small.

Do not let your bills accumulate over a long period of time since it may lead to another harsh reality of bankruptcy and the the resultant insolvency. If you still feel that you will still require a credit card, ensure that it is insured. This kind of card will be exempted from bankruptcy.

Other things that you should do include paying in advance for for your insured or secured cards. This will earn you points on your credit ranking and furthermore you will avoid the last minute rash that is otherwise avoidable. You should also refrain from co-signing for a loan with a person who may be forced to pay up on your behalf, or whom you may be forced to pay up for in case of insolvency.

More important, you can open up a savings account and take good care of it. Future potential creditors may take a look at it and consider you for credit or lending. Work out a budget that you can live on and by all means do not spend your money before you have earned it!

There are a lot of things people don’t know about bankruptcy. Misconceptions are abundant, especially with the new law changes that took affect in 2005. If you’re confused about what bankruptcy means – and doesn’t mean – then check out a few of the things listed below…

You must be flat broke to file for bankruptcy.

Wrong. The fact is, the only criteria to filing for bankruptcy are an inability to pay your debt as it comes due. Actually, waiting until your mortgage company is ready to foreclose to file for bankruptcy leaves you with fewer options to safeguard your financial future.

If you file for bankruptcy, you’ll never be able to get credit again.

Wrong. You can begin rebuilding your credit two years after fulfilling your debt requirements under your bankruptcy agreement. Although it will remain on your credit record for ten years, many people can begin to slowly rebuild their credit rating by paying their rent, mortgage and utilities on time; then applying for a low credit limit store credit card; and finally applying for bankruptcy loan when they are ready.

Once you’ve gone bankrupt, you can never own a home.

Wrong. Once you begin to rebuild your credit, creditors of all types – including mortgage lenders – will begin to consider lending you money. Your interest rates may be higher, but it is possible to obtain a loan. Sure, it’ll take awhile to prove to lenders that you can handle payments again, but it is possible to buy your own home following a bankruptcy.

Taxes cannot be discharged in bankruptcy.

Wrong. Some are such as personal income taxes that are more than three years old.

My student loans aren’t dischargeable under the new bankruptcy laws.

This one is generally true, but there are some exceptions. If the debtor can prove certain hardship, student loans may be dischargeable.

If I signed an agreement stating that a debt cannot be discharged in bankruptcy, it is my debt forever. Wrong. Although there are extremely limited exceptions, these bankruptcy clauses are unenforceable and are a tactic used to scare debtors into not filing bankruptcy.

I can lose my job if I file for bankruptcy. Wrong. It is illegal to fire someone for filing for bankruptcy. If, however, you apply for a new job after filing for bankruptcy, a potential employer can use the bankruptcy filing as a factor in deciding whether to hire you or not.

Now that you understand some of the misconceptions surrounding bankruptcy, you’ll be better prepared to make an informed decision as to what is best for you and your family.

If you have had to declare bankruptcy for any reason, it is easy to get overwhelmed by the sheer volume of things to consider. But, getting a credit card after bankruptcy is one of the best ways to begin rebuilding your credit score, if you are careful and selective about choosing the right card and provider.

Let’s face it; a bankruptcy is a huge blow to your credit-worthiness. However, a sober assessment of your situation, followed by learning from the mistakes that may have led to the bankruptcy, is key to getting your financial house back in order by obtaining lines of credit that you can use to rebuild your credit score.

Get Credit Reports From All 3 Major Credit Bureaus

The first step to finding the best rates on a credit card after bankruptcy is getting a copy of your credit report from each credit bureau. Lenders rely on the credit reports from 3 main credit agencies to determine your credit-worthiness, and the rates that you will pay on borrowed money. These agencies are: Experian, Equifax, and TransUnion.

After you receive your reports, carefully examine them for inaccuracies that can continue to undermine your efforts to re-establish credit. If you discover claims that are false, contact each agency and:

Secured vs. Unsecured Credit Cards, Which is Best For Your Situation?

There is no stock answer that will work for everyone on this. The particulars of each person’s situation will dictate which option will work best for them but here are some facts to inform your decision:

Secured Credit Cards

Secured credit cards are cards that are issued from banks or credit unions that guarantee a specific line of credit as long as you have a corresponding balance in your account that they can use as collateral if you default on a payment. For example, if you have a $500 line of credit, you must maintain a balance of $500 in your account.

Because your debt is secured by a predetermined amount, you can generally get a more favorable rate of interest from these lenders. But, it is recommended that you pay the full balance each month to keep your account in good standing. Look for a card that will offer the option of becoming unsecured after a period of responsible use.

Unsecured Credit Cards

Unsecured credit cards are easily available from all sorts of lenders and there lies the rub, easy availability. These cards offer huge come-ons about increased lines of credit without the need to maintain a balance, but you run the risk of repeating some of the same mistakes that may have contributed to your bankruptcy in the first place.

In fact, there are many credit card outfits out there that specifically target people that have filed for bankruptcy and take advantage of this by offering egregiously high interest rates. Also, they further leverage their position by nickel and diming you with all sorts of application fees meant to prey on your financial vulnerability.

Whichever type of credit card that you choose, make sure that you explore all of your options, and read the fine print before you sign the agreement. There may be hidden fees and costs that will hinder, not help, you in your quest to rebuild your credit rating. Also, make sure that you do not apply for more than 1 or 2 different credit cards. Each rejection will negatively affect your credit rating, and defeat the purpose of getting a credit card in the first place.

Summary

Getting a credit card after bankruptcy to start rebuilding your credit rating is a marathon, not a sprint. You must carefully plan when and how to use your credit card so that it becomes an asset instead of a liability.

Make sure that you pay off the full balance each month, well before the due date, and use your credit card only when absolutely necessary. After every 6 months of responsible credit management, call your lender and ask for a lower interest rate. They might not honor your request each time, but they will like the fact that you are actively pursuing the means to manage your credit more effectively.

The next time you reach for your wallet and don’t have the cash on hand to make a purchase, ask yourself, “Is this a want or a need?” If the answer is the former, put your wallet away and congratulate yourself for making another step on the long road of credit rating recovery.

At this point you probably know that in order to get approved for a loan after bankruptcy, you need to improve your credit history and raise your credit score. There are plenty of ways to do so but the use of a credit card is an excellent alternative as it will aid you to recover your credit faster and more efficiently.

Recovering your credit is essential when you want to get approved for a loan after bankruptcy. Most lenders will just run away at the sole mention of the word bankruptcy, so in order to reduce the risk tag that shows on your credit report, you will have to improve your credit history and try to enhance your credit score.

Credit Card & Credit Score

A credit card can do a great deal for your credit score. Since credit card companies inform every credit bureau about your credit behavior, you can, by means of a credit card, improve your credit history easily. You just need to make all your purchases with a credit card, either secured or unsecured, and then pay the balance in full.

While your payments keep getting recorded into your credit report, your credit score will start a slow but continuous ascendant path that will eventually lead you again to a fair credit score. At that stage you will be able to apply for a loan without fearing getting declined by the lender due to your past bankruptcy.

Cash Back Credit Cards

Cash back credit cards are a great tool for improving your credit. You can use this card to make all your purchases and you will receive cash back at the end of each period. This way you will have larger balances with the corresponding payments that will be recorded into your credit history and at the same time you will receive cash back that you can use for further purchases or destine it to your savings account which is another healthy financial practice.

These credit cards usually offer larger cash back amounts when you purchase on certain places designated in the contract. This is because the credit card company has agreements with other establishments. Just make sure that the products you purchase are not too overpriced at those places. Otherwise, you will be loosing money instead of saving. Nevertheless, though they offer larger cash back at those places, you can still get cash back if you purchase at other stores too.

Bankruptcy Loan Approval

Once your credit score has recovered, you will be able to get approved for a bankruptcy loan without too much hassle. If your credit score or your credit history still will not allow approval you can choose to wait or you could try offering some sort of collateral. There are home equity loans specially tailored for those that have gone through a bankruptcy that offer more flexible requirements than unsecured loans.

Applying with a co-signer (as long as the co-signer has a good credit score) will also aid you in the approval process. The co-signer’s credit report will also be taken into account at the time of approval and will compensate for what your credit report lacks.