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Bankruptcy can be stressful. Not only is it costly, it also has long-lasting negative effects on your credit. But don’t lose hope — you can rebuild your credit and improve your credit scores by getting a new credit card and paying it off responsibly each month.
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Declaring bankruptcy is a major decision, and it’ll have major negative effects on your credit. But with a little dedication, you can build your credit scores back up.
Responsible use of credit is the best way to recover after a bankruptcy — you’ll need to re-prove that you can be a responsible borrower. In large part, that means building up a solid record of on-time payments.
Credit cards can be valuable tools to help repair your credit, but getting a credit card after bankruptcy can be tough. That’s why you’ll likely need to go with a secured credit card, which requires a security deposit to qualify.
Many cards designed for bad credit come with extra fees, like setup/account opening fees, monthly fees, and fees for simple actions like credit limit increases or getting paper statements. But our best credit cards below are light on fees, leaving you with more cash to help pay off debts.
If you won’t use your new credit card responsibly, it would be better not to get it at all. If the problems that led to your bankruptcy are unresolved — like spending above your means, or a lack of a stable job or emergency funds — opening a new line of credit may just get you into further trouble.
|Cash Back Rewards||Discover it® Secured (Review)|
|Low Security Deposit||Secured Mastercard® from Capital One (Review)|
|No Bank Account||Citi® Secured Mastercard® (Review)|
|Easy Approval||OpenSky® Secured Visa® Credit Card (Review)|
The Discover it® Secured (Review) is the Cadillac of secured cards. While many secured cards seem like punishments for having poor credit, Discover’s secured card looks more like a typical reward credit card, complete with cash back and an intro bonus.
You can use this card to improve your credit scores while earning some rewards in the process, and you’ll have access to a couple handy tools to keep tabs on your credit. The Credit Scorecard will show you one of your FICO Score 8 credit scores whenever you’d like, based on your TransUnion credit report, along with specific tips to build up your credit. And the new account and inquiry alerts will let you know if anything new pops up on your Experian credit report, without having to check it manually.
|Introductory Bonus Offer|
The Secured Mastercard® from Capital One (Review) has a lot to recommend it as a credit-building tool. While most secured cards just give you a credit limit equal to your security deposit, this card gives you two ways to increase your credit limit beyond your deposit.
If you’re approved you’ll be asked to provide a deposit based on your creditworthiness: either $49, $99, or $200. But, no matter what you’re asked to deposit, you’ll receive a starting credit limit of $200. Those requirements are quite low when it comes to security deposits, and you may get a bit extra right off the bat (you can deposit up to $1,000 for a $1,000 credit line).
Then, once you get your card, Capital One may automatically consider you for a higher credit line after six months. Use the card responsibly, and manage your other debts responsibly, for the best chance at a higher limit.
So you may wind up with a credit line quite a bit higher than your deposit, which is not only convenient, but can help keep your credit utilization low — and lower utilization is better for credit scores.
It’s fairly unassuming, but it stands out in one important respect: You don’t necessarily need a bank account to be approved. This could be the card you’re looking for if you’re one of America’s many unbanked consumers (over 14 million American adults didn’t have a bank account in 2017). You’ll need to visit a physical Citibank location to apply without a bank account.
Other than that, it’s a lot like your standard secured card from Central Casting. There are no rewards or fancy benefits, but you can use it to improve your credit and eventually qualify for better cards. And to that end, if you manage this card and your credit responsibly, Citi may consider upgrading you to an unsecured credit card, such as the Citi® Diamond Preferred® Card (Review).
The OpenSky® Secured Visa® Credit Card (Review), unlike the other cards here, stands apart for not requiring a credit check to be approved. That means you’ll likely have a higher chance of qualifying, because your poor credit scores won’t hold you back.
You also won’t need a bank account to provide the security deposit. Instead, you can pay by debit card, money order, certified check, or Western Union.
But that easy accessibility comes with some caveats. This card has an annual fee, no credit monitoring features, no rewards or benefits, and some reports of poor customer service and slow processing. But, if you’re working with bad credit and haven’t been able to qualify for the secured cards mentioned above, OpenSky may be worth a shot.
The Petal® 1 No Annual Fee Visa® Card isn’t a secured card, so you won’t need to put down a deposit to get approved. But, like a secured card, it gives you a better-than-average shot at approval if you’re dealing with low credit scores.
This is because Petal will check more than the typical factors when judging your creditworthiness. You may be asked to connect your bank account, so Petal’s “cash flow technology” can see your spending patterns, income, and savings.
The Petal card is inexpensive, with no annual fee or foreign transaction fee. And you may be granted a fairly high credit line, compared to other cards designed for bad credit.
If you’re struggling with poor credit you may have been offered credit cards from Credit One Bank. We typically advise avoiding cards from Credit One, for a variety of reasons that include complaints about customer service and slow payment processing. You may also get offers for some of the worst credit cards on the market — even though your credit is poor, you can probably do better.
There’s at least one unsecured card that could be worth considering: the Fingerhut Advantage Credit Account (Review). This card can only be used with Fingerhut and comes with a lot of strings, but it can be used to help repair your credit.
It may seem counterintuitive to get a credit card after bankruptcy. Isn’t this just creating a new opportunity to get into even more debt? But the truth is, a new credit card could be a great way to rebuild your credit — if you’ll use it responsibly.
A Chapter 7 bankruptcy can remain on your credit reports for up to 10 years; a Chapter 13 bankruptcy can remain for up to seven years. Each type of bankruptcy will hurt your credit all on its own, but if things got that bad, it’s likely that you wound up with some late payments on your credit reports as well.
After bankruptcy, one of your goals should be to drown out those late payments with a solid record of on-time payments. The more on-time payments and accounts you have compared to late payments, the better.
Here’s some good news: Negative items on your credit reports do the most damage when they’re fresh. As time goes by their impact will diminish. So manage your credit well, and in time you’ll see the fruits of your labor manifest in higher credit scores. But this process takes time, and you’ll have to be patient.
Some more good news: Lenders, like credit card issuers, might be more eager to provide you with credit after a bankruptcy than you’d expect. Consider that, after a bankruptcy, you’ll have discharged a lot of debt, freeing up cash for payments to a new card. Issuers will feel free to give you high interest rates. And if you filed for Chapter 7 bankruptcy, you won’t be able to do that again for eight years. If it looks like you’ll be able to make your payments, lenders may be willing to extend new credit to you.
Here are some tips to help you stay the course and prevent new debt from building up:
Besides getting a new credit card of your own, you can rebuild your credit after bankruptcy by:
You can apply for a new card whenever you want, but you’ll probably have a better shot at approval after the bankruptcy is discharged. That could mean waiting a while:
With Chapter 7 bankruptcy, after your debts are discharged the accounts should read zero on your credit reports — but it could take a while for all of your credit reports to be updated. Check your credit reports at all three major credit bureaus (Equifax, Experian, and TransUnion) around 90 days after the bankruptcy is discharged. If the relevant accounts read zero, this can be helpful for your credit, and that’s when it makes sense to apply for a new credit card.
During a Chapter 13 bankruptcy, in which payments are required over several years, you may need to get the trustee’s approval to get a new credit card. Or you may need to wait until the process is complete and the debts are discharged.
The easiest card to get after bankruptcy is probably a card like the OpenSky® Secured Visa® Credit Card (Review). It doesn’t require a credit check, making it relatively easy to qualify for even with bad credit.
And then there’s the Petal® 1 No Annual Fee Visa® Card, which looks at an expanded set of factors to give you a better chance at approval. It will ask to connect to your bank account to review your income, spending, and saving.
So before going with the OpenSky card, which has a few drawbacks, we recommend checking out the Petal card along with our top secured credit card picks:
Brendan has been writing about personal finance for over eight years, and is now taking on the challenge of bringing high quality credit education to the masses. He makes sure that Credit Card Insider is covering the most important credit topics transparently and precisely, and that we have up-to-date reviews of credit cards so you can find cards that are right for you.
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