It is often seen that after bankruptcy filing,
individuals are reluctant to get back to the world of credit cards all over again. A notion persists that it is the overuse of this credit that binds them with the chain of debts pushing them further towards bankruptcy filing.
It is true to a great extent that debts are caused as a result of over utilization of credit cards. But, on the other hand financial analysts feel that rebuilding credit is an important if you want to recover from personal bankruptcy. Here are some know-how’s you can consider if you are applying for a new credit card after bankruptcy.
Why do you need Credit after Bankruptcy?
No matter how much you may disagree on a fact that credit history does not have a major role to play after bankruptcy. The fact does not change that credit history has a greater role to play in the life of a contemporary American. Every tits bits of your financial life have some effect or the other on your credit score. Some of them are as follows:
1. House rent: When allowing for rent, many landlords check your credit report before renting out. The credit report includes a lot of information on the background of the tenant such as the debts he owe, payments made on various debts etc. All such information provides a fair idea to the landlord about the tenant’s capacity to pay timely rent.
2. New job opportunities: It is a common practice of the employers to check the credit report of a potential employee before finalizing his appointment. Lawmakers are trying to bring some changes to this practice. But for the time being you are sure to face some cross checking of your credit report if you apply for a job.
3. Loans: The most important reason to restore credit is to have a free access to loans. Be it a credit card, a mortgage or something between, whenever you apply for a loan the first thing that the lender does is to check your credit. The loan terms will be based on your credit score and the information on your credit report.
If you are regular with your loan payments, lenders can agree to offer you loans at lower interest rates. But if you have a poor credit history your potential landlords, employers or lenders would not be willing to give out loans. It is important that they are ensured of the return of their rent amount. A good credit card report normally suffices as a proof of this fact. As such having a good credit report even after bankruptcy is very important.
When should you apply for a Credit Card?
The appropriate time for applying for a credit card is not fixed. It depends specifically on your financial habits and the improvement you wish to notice in your financial state. The primary factors that you can look into before applying for a credit card are:
• Usage of the credit card: Most people have the tendency to use credit card anywhere and everywhere. As such at the end of the month they face severe financial crisis leading to debts. It is thus suggested that you should use a credit card just like cash. It should be used to pay the amount which you could have managed through card as well. Using card to buy things which you normally cannot afford with cash can prove difficult in the long run.
By following this method you can pay your bills without falling prey to the vicious circle of debts. It should be remembered that cards are meant to serve an emergency purpose with added advantages like online shopping. But it does offer you the license for unlimited spending.
• Reason behind bankruptcy filing: If you come across certain unexpected circumstances like a divorce, death, illness or job loss you may be pushed towards Bankruptcy filing. In this circumstances consider saving up about two months expenses before you apply for a new card. In this way you can manage for the time being without running up a new balance on your card if another emergency situation emerges.
• Cards you will get: Though there are a hell lot of credit cards available in the market, you should settle for the one after a thorough research. If you only qualify for cards that carry outlandish fees, wait a bit longer before you can try out for a better deal.
Thus if you are in the process or have already filed bankruptcy, get ready to restore your credit cards. Though you may dismiss the idea of keeping a credit card for the fear of getting into further debts, but take a closer look at the future aspects. The importance of credit cards even after bankruptcy is clearly visible. You just need to be a bit prudent with your finances so as to manage things better!