It might surprise you to know you will be mailed credit card applications even after you have filled for bankruptcy. After all, you’ve just manage to write off your previous credit card debt and have it dismissed by the courts under the bankruptcy law.
Why would a lender be interested in issuing you a credit card? What does the lender have to gain by granting credit to someone who has proven he can’t pay his debt?
The answer is twofold. First, if you have just gone through a bankruptcy, you cannot file for bankruptcy again for 8 years. Eight years is a long time and during that time period you may not be the horrible credit risk you believe yourself to be.
There has been a huge increase in bankruptcy filings over the past four or five years. This is a direct result of a rising unemployment rate and a struggling economy.
There was a time when filing for bankruptcy was avoided at all costs by responsible individuals. It carried a stigma and those who chose the path were considered financially irresponsible.
That attitude has changed in recent years. Many people who file personal bankruptcy today have been responsible consumers in previous years.
The rapid increase in interest rates by credit card lenders in 2009 and loss of jobs and income have resulted in financially responsible people who have no place to turn except to bankruptcy.
An Illusion
After bankruptcy, your credit is at its lowest. Your debt is wiped out but your credit is damaged for years to come unless you take action to improve your credit scores.
Applying for standard credit cards is not an option to pursue. You will not be approved by DiscoverCard or Chase Bank. Capital One will not be interested in approving your application.
No matter how many applications arrive in your mailbox you should ignore those offers unless they are targeted to someone with bad credit.
When you fill out card applications after bankruptcy it should only be done when you have a reasonable certainty the application will be approved. Each time you complete the form a request is generated for your credit file from the credit reporting agencies.
Each request leaves a mark that you have applied for credit. When you are disapproved that is also noted in your file and damages you credit even further.
Best Options
You need a sub-prime lending bank to successfully complete a card application. We’ve heard much about sub-prime mortgages and the terms has become associated with bad financial practices. In truth, sub-prime lending banks serve a useful purpose.
If you submit an application to a sub-prime lender, there is a good chance you will be approved for some type of credit card. Many sub-prime credit lenders now have only one application and will pull your credit file one time only.
Once they review your credit file, debt and income, the lender will offer you a credit card based on your history. This may be a standard credit card with a Visa or MasterCard logo with an interest rate higher than usual and stiff fees.
More likely, you will be offered a secured card or a partially secured credit card account that will require you to place funds in a savings account to guarantee payments should you fail to meet the terms of the credit lender for timely payments.
This type of application is relatively new to consumers who are accustomed to carefully comparing the terms, rewards and benefits of various credit offers and then choosing which to apply for.
By accessing your credit file before telling you what credit card you are applying for, the sub-prime lender avoids having to decline many applications.
Your credit rating is requested only once and you can choose to accept or decline the lender’s offer of a specific type of credit card.
Summary
Card applications after bankruptcy are often mailed to consumers shortly after their debt has been dismissed by the court system. There is no pointing applying for standard cards as you will be denied and can further damage your credit file.
Instead, apply to a sub-prime lender and then decide whether to accept the credit card the lender offers to you. You can also read our guide on no credit check cards which are also suitable for consumers that have filled for bankruptcy
