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Rebuilding credit after bankruptcy by applying for a credit card

You've filed for bankruptcy in California. The last thing you may want to be thinking about right now is accruing more debts. However, if the court approved your petition for a Chapter 13 bankruptcy, it could take up to five years for you to complete the debt repayment plan. During that time, there's a good chance you'll discover you need some sort of credit before your repayment plan is complete.

Rebuilding credit

Not only may you find yourself needing a credit card in an emergency, but opening new lines of credit can be a great way to start rebuilding your credit score after bankruptcy. Avoiding credit following bankruptcy is an all-too-common mistake that people make, as the only way your credit score will improve is if there are companies sending in new, good credit reports about you.

Do I need permission?

While you are completing your debt repayment plan, you do need permission from your trustee before incurring any new debts. Before the courts will allow you to open a new line of credit, they will require proof that this new debt will not inhibit your ability to complete your established repayment plan. Because most - if not all - of the accounts available to you initially will have high interest rates or other fees, proceeding cautiously is your best option at this point.

Another option to consider is a secured credit card. While applying for a secured credit card is not technically an extension of credit, it is probably still advisable to check with your bankruptcy trustee before proceeding.

What is a secured credit card?

A secured credit card can be a great way to begin rebuilding your credit score and demonstrating responsible financial habits. Usually, you can apply for one through your local credit union or bank. They will require a deposit of a certain amount of money into an account. This savings account guarantees, or "secures," all amounts charged on the card, up to that limit.

You are then able to make purchases using the card and pay the amount off on a monthly basis. It's usually considered wise when you are just starting out to keep these purchases small, whenever possible. Naturally, it is important to make all monthly payments on time. Contrary to popular belief, carrying a balance from month to month is not necessary to build credit.

Be patient

While the process can seem tedious, rebuilding your credit history after bankruptcy takes time. One of the best methods is to have an active, open account and to establish a history of responsible payments made on-time. Remember that you are developing sensible and conscientious budgeting habits and working toward a more stable financial future.

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