| After Bankruptcy - Should You Apply For A Credit Card? |
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| Written by Bob Tremerituus |
| Tuesday, 07 September 2010 18:20 |
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Credit cards can be a prime reason for an individuals bankruptcy in the first place. Easy credit, combined with what many consider to have been irresponsible lending, culminating in the latest global economic crisis, have been largely responsible for many people spending beyond their means.
Credit cards can be a prime reason for an individuals bankruptcy in the first place. Easy credit, combined with what many consider to have been irresponsible lending, culminating in the latest global economic crisis, have been largely responsible for many people spending beyond their means. For the unfortunate ones who have gone through bankruptcy, the idea of a credit card can be repellent, given that this was probably the single most important thing that contributed to their downfall. However, whilst it may seem very sensible to not have a credit card after one has been declared bankrupt, this is not necessarily the right approach. Life after bankruptcy can be a bit of a shock. With a credit rating that has all but disappeared, simply obtaining a bank account and other financial products we used to take for granted becomes difficult. One needs to restore ones credit rating after bankruptcy, just to be able to enjoy a "normal" financial life. To do this one has to prove to the credit agencies that one is capable of managing ones financial affairs properly. One thing one should consider before even filing for bankruptcy is chapter 13. Chapter 13 does not write your debt off like chapter 7 (making chapter 7 the most popular form of bankruptcy in the US), but it does not sell all your assets either. However, the main point about chapter 13 is that it is a repayment plan, and as one makes the repayments over a 3-5 year period, so ones credit rating improves. Another option to repair a credit score is to get a secured credit card. Here, a card is issued against a sum of money one puts down as a deposit. That way one cannot overspend or be in a position where the balance on the card cannot be paid off. The advantage is however, that ones use of the card will improve ones credit score, as long as the balance is paid every month. Sure, there is no real advantage to the card holder who may as well just use cash, but the agencies have no check on cash spending, so although they may be living within their means and spending sensibly, this will have no effect on their credit score if they are using cash. The one thing to watch however, is for disreputable card companies. Make sure that your card is registered with the credit agencies. Disreputable card companies sometimes do not register which means that your credit score will not improve, as those bodies who matter are unaware of your card. Obtaining a credit card after bankruptcy is a real possibility, though it may not be the type one is used to. However, with little risk and the opportunity to repair a credit rating, they should not be written off. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. In harsh economic periods our finances can can back to haunt us, particularly if we have borrowed too much in the good periods. We may start to wonder how to claim bankruptcy. For more free information visit www.howtoclaimbankruptcy.net. Check here for free reprint licence: After Bankruptcy - Should You Apply For A Credit Card?. |