After Bankruptcy Credit Cards

By Aparna Iyer

The following article explores the options that are available to a consumer who is interested in procuring credit cards after bankruptcy discharge.

Filing bankruptcy is definitely the last resort for debt laden consumers, whose inability to discharge debts, forces them into a position of acknowledging the same in a court of law. Prior to a bankruptcy filing, debtors may have unsuccessfully tried to repay debts, by consolidation followed by voluntary repossession and eventually default, and subsequently witnessed the effect of their credit ratings sliding from R7/I7 to R9/I9. However, the matter does not end here. There are a number of repercussions of filing bankruptcy. Thankfully, most of the issues can be dealt with by undoing the damage to the petitioner's credit score. From the perspective of the borrower, a fall in the credit scores by as much as 350 points can be expected in the aftermath of bankruptcy. Since the need for credit persists, despite filing bankruptcy, consumers have to deal with the issue of procuring credit cards after bankruptcy.

Feasibility of Procuring Credit Cards After Bankruptcy Discharge

A bankruptcy discharge is an order, that is issued by the bankruptcy court at the end of a bankruptcy case, which has the effect of wiping out the debtor's dischargeable debts. Prior to 2005, 'after bankruptcy credit cards' were hard to come by, since bankruptcy was typically looked upon as a consequence of bad debt management. Creditors were unwilling to issue credit cards to ex-petitioners on account of 2 reasons.

• It was believed that having filed bankruptcy once, the ex-petitioner may not hesitate to file again in the event of being unable to discharge debt obligations.
• Credit cards were unsecured debts and in the event of the consumer filing bankruptcy, the credit card company would not recover the extended sum.

However, a change in the bankruptcy law in the year 2005, brought some relief to people desirous of obtaining after bankruptcy credit cards. The law made it tougher for debtors to refile, thereby reducing the risk that creditors will not recover their dues. This in turn resulted in the lenders agreeing to extend credit to consumers with troubled credit histories. The following table clearly illustrates the point.

Old Filing	Refiling	Old Waiting Period (Years)	New Waiting Period (Years)
Chapter 7	Chapter 7	6	8
Chapter 13	Chapter 13	Nil	2
Chapter 7	Chapter 13	Nil	4
Chapter 13	Chapter 7	4	6

Hence, availing credit after bankruptcy has been made possible by implementing laws that safeguard the interests of the lender, thereby encouraging the issuer to extend credit to people desirous of getting a credit card after bankruptcy. The following credit card options are available to the consumer who intends to procure a credit card with the intention of building credit scores.

How to Get a Credit Card After Bankruptcy?

Secured Credit Cards

For a long time, secured credit cards were synonymous with after bankruptcy credit cards since these cards could be procured within 6 months of bankruptcy discharge. These cards required a cash collateral deposit that became the credit line for the account. The issuer sometimes rewarded the consumer by extending additional lines of credit, without requesting further cash deposits, as a compensation for timely interest payments. In addition to this, the deposit also earned interest, that was synonymous with the interest earned in a savings account. However, the greatest reward was in the form of improved credit scores that was contingent on the credit card company reporting the timely payments to the credit bureaus.

Tips

All secured cards have higher annual fees and interest rates as compared to regular unsecured cards. Hence, the consumer should try and look for a secured credit card that does not require any application fees. Otherwise there is a risk of the account opening fee, the maintenance fee and other expenses adding up and consuming the borrower's credit line without the consumer having purchased even a single item.

The consumer should also ensure that the balance on the card is paid off entirely, from the perspective of building credit scores, since it doesn't pay to carry forward the balance to the next month. This is because revolving credit always impacts credit scores more negatively as compared to a loan that is repaid in installments.

The consumer should verify that the issuing company reports the timely payments to the credit bureaus since building credit scores is contingent on the same. Moreover, the credit card company should not flag the card as secured while reporting to the credit bureaus, since doing so has an adverse impact on the borrower's ability to rebuild credit scores.

Finally, the consumer should ensure that the secured credit card converts to an unsecured card within a period of 12 to 18 months. This is generally the case but there are companies that may be unwilling to allow the consumer to access a line of credit that is not collateralized with a deposit.

Unsecured Credit Cards

Unsecured credit cards or common credit cards are the way to go if a consumer wants quick credit repair. As mentioned earlier, unsecured credit cards carry lower annual fees and lower interest rates (annual percentage rate) than secured credit cards. However, due to the dearth of laws regarding usury and predatory lending practices, the interest rates on these cards is still very high. Issuers feel free to charge a high rate of interest to the consumers who are perceived risky and are interested in procuring 'after bankruptcy credit cards'.

Tips

The consumer should look for a credit card that has a low annual fee. This is because a whopping annual fee will result in the borrower having to pay a hefty amount just for the sake of having a credit card despite insufficient use. There are a number of issuers that fulfill this requirement but make up for the low annual fee by levying a number of fees that nullify the impact of the low annual fees.

One time fees like account opening fee and program participation fee, do not seem like a big deal to a casual observer but these fees, in addition to the account maintenance fees that are generally paid on a monthly basis, tend to eat into the initial credit line. The net result is a very small line of credit. Moreover, the consumer has to pay interest on the fees since these are charged to the credit card.

Although, a card with a lower rate of interest is desirable, the interest rate on the card or the APR does not matter if people pay off the entire balance on the credit card. A number of after bankruptcy credit card providers also charge additional fees for reviewing the account and increasing the borrower's credit limit.

Payroll Deduction Credit Cards

These credit cards work by allowing the amount of money, that is spent by the card holder, to be automatically deducted from his/her paycheck over a period of two months, thus preventing interest accumulation and late fees. Consumers, who otherwise find it difficult to obtain a credit card, can procure a payroll deduction credit card provided they have a job. Consumers should be full-time employees for a minimum period of six months or so and the annual base salary of the employees will determine their credit limits. These cards are tied to the consumers' job, and hence they are not popular in an economy wherein a number of people are still unemployed.

It is clear from the above discussion that obtaining credit cards after bankruptcy is not impossible. A number of options are available to the consumers. It's up to the borrowers to weigh the pros and cons of each alternative and choose appropriate after bankruptcy credit cards that satisfy their credit requirements without compromising on their ability to rebuild credit scores.

(Source : buzzle.com)

Free Credit Score - No Credit Card Needed

By Sayali Bedekar Patil

Credit scores provide a one glance picture of an individual's credit worthiness and the default risk he poses to the lender. The better your credit score, the better your candidature for the lender. Your credit card can be the vital information source to agencies that track your credit score. What if you want your credit score, but don't possess a credit card? This article tells you how you can get your free credit report (no credit card needed).

If you wish to receive credit on good terms and better rates, you need to have a good credit score. For a good credit score, you need a good credit history. And again, to get a credit card, you need a good credit score, and so goes the viscous circle. This article deals with how to get a free credit score (no credit card needed). But before we move on to getting a free credit score with no credit card needed, let us have a look at what the essential terminology in this field pertains to.

What Exactly are Credit Scores?
Credit scores were the brainchild of the Fair Isaac Corporation (FICO), that developed a methodology to calculate them, in the year 1958. There are currently three credit bureaus that give out credit scores, namely Experian, Trans Union and Equifax. Credit scores lie between 300 and 850, and anything below 500 is not worthy of even considering for a loan, regardless the terms or the interest rate. The higher the credit score, the more creditworthy the borrower, and that is the most important use of credit scores. These credit scores are used to effectively judge the credit standing of an unknown individual. No matter who you are, you will only get cheap loans if you have a good credit score because there are no friends in the credit business. Know more on credit scores and what they mean.

The calculation of an individual's credit score is tedious business. Information about the individual is collected from all the possible databases and compiled to get his credit score. Accounts of his past payment delays, payment defaults, bankruptcies and even liens and judgments, collectively form the basis for the generation of the individual's credit scores. As credit cards are the stock house for information pertaining to an individual's credit standing, his credit usage habits and his payment methods and status, credit scores are very difficult to get without disclosing the individual's credit card details. Hence, it is rare to find a place to get free credit scores with no credit card needed. Before we move further, get your credit score ratings explained and you can also take a look at the credit score rating scale.

What Does Your Credit Score Range Say About You?
Holding a good credit score range puts you on a vantage point. Lenders are getting more and more cautious about lending money to anyone. They demand more knowledge on who the person is, what will he be using the money for and how good is his financial standing (will he be able to pay it back with interest). With so many parameters to research for every individual who applies for a loan, banks and financial institutions surely have their hands full. Credit scores give all such information to them, neatly packed in a particular range of credit scores. If you fall in the upper range of credit scores, you are a good, safe bet to finance with a loan. Credit scores save the lender the trouble of researching every individual and also make the borrower's life simple by giving them easier access to loans, without filling out long, informative forms explaining each detail about themselves. Moreover, credit scores lend the aspect of credibility to the individual's own credit statements, making him an even more worthy loan candidate. Know more about credit score ranges and what they mean and credit score scale.

What's the Relationship Between Credit Cards and Credit Scores?
Just like getting a free credit report (no credit card needed) is a difficult-to-find thing, so are free credit scores (no credit card needed). Now why is that so? You will never believe what information your credit card company has on you. They know what you owe to whom, how and when you're likely to repay, what time do you leave for work and even what time you will be available and where. Amazing stuff, right? Not really, you see, credit cards are essentially databases that contain your entire credit history, ranging from where are you most like to spend, on what and even with or for whom. They even know your habits and payment or credit mentality. It is no wonder then, that credit cards form effective credit monitoring tools for other credit agencies. So if you wish to generate a credit report or a credit score, all you need to do is tap into this database and compile all the information to get whatever you want. This is not as easy as it sounds, and hence, it is very rare to come across a free credit report (no credit card needed) advertisement. The next paragraph though, will offer the solution, a site where you can get absolutely free credit scores without giving out any credit card details.

Get a Free Credit Score (No Credit Card Needed)
You can get yourself an absolutely free credit score from the website named Credit Karma. It retrieves your credit report from one of the three credit bureaus (Equifax, Trans Union and Experian) without asking you for a credit card number. It does not ask for a service payment and offers completely free credit scores, no strings attached. This free service is supported by on page advertising.

I hope you'd have found what you came looking for, a site that gives out free credit reports without asking for credit card details. There are sites that give free credit reports (no credit card needed), so make sure you use the facility well. Always try to improve your credit scores and always aim to be a low credit risk.

(Source : buzzle.com)