Getting a Bankruptcy Credit Card to Rehabilitate Your Credit

Getting a credit card after bankruptcy is a difficult, dangerous task. Your credit score is shot: debt may remain on your credit report for as long as 7 years, and a bankruptcy petition stays on for 10. Especially now, when banks shy away from any and all credit risks, finding a line of credit is pretty difficult. However, you can qualify for a bad credit card, and with a secured credit card, you can build up enough of a payment history to diminish the effect of bankruptcy on your credit score.

Your options: limited, but not gone

Orchard Bank MasterCard: Let’s face it: you’re probably not going to qualify for an unsecured credit card straight out of bankruptcy. Your best shot is the Orchard Bank MasterCard, which has a high annual fee (effectively, $68 the first year and $59 thereafter) but a decent 14.9%-19.9% interest rate. It is just about the easiest card to qualify for, so if you aren’t approved, you probably won’t get a regular credit card at all.

Capital One Secured: The Capital One Secured MasterCard has a low $29 annual fee, and also a lower minimum security deposit than the Household and Orchard Bank credit cards ($49, $99 or $200). The only downside is that its APR is a lot higher, at 22.9%, but since you won't be carrying a balance anyway (right?) it's nothing to worry about.
Credit Unions: Another option is to look at your local credit unions. Some credit unions have a mission to lend to those with bad credit, minorities, and the poor, and will be more willing to assume the risk of lending. The Navy Federal nRewards secured credit card is a pre-approved credit card that earns 1% rewards and has no annual fee. In order to get the card, though, you or a family member must serve in the Army, Air Force, Navy, Marines, or Department of Defense. Spectrum Federal Credit Union, which is open to everyone, offers the Visa Creditbuilder to help establish or re-establish good credit.

Only some banks will lend you even a secured credit card straight out of bankruptcy. According to the New York Times:

• Citibank considers those with bad credit on a case-by-case basis
• Wells Fargo requires applicants to be out of bankruptcy for a year
• Bank of America generally requires you to be a year out of bankruptcy, and that you have another relationship with the bank (such as a checking account)
• Capital One considers you eligible immediately after bankruptcy
• HSBC (Orchard Bank’s parent) approves anyone who makes the security deposit, except in extenuating circumstances. The bank doesn’t consider your credit score, and bankruptcy does not make you ineligible. Because of this, we consider Orchard Bank to be the most bad-credit-friendly lender.

Rebuild your credit score

After you’ve discharged your debts with bankruptcy, you can focus on rehabilitating your credit score. A secured credit card will help, as long as you do it responsibly. A prepaid debit card like the Walmart MoneyCard will not – payments aren’t reported to credit bureaus at all.

One of the three big credit rating agencies, Experian, will consider on-time rent payments in your credit history. The other two won’t, but will mark you down if you pay your rent late.
The best way to recover from bankruptcy is to start slowly. Get a secured credit card and show, month after month, that you can pay off your debts. It’s a long, slow process, but eventually you can put your bankruptcy behind you.