After Bankruptcy - Are Credit Cards To Be Avoided?

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.

But is this a good idea? Sure, not having a credit card will stop them getting into credit card debt again, but this may not be the beat attitude to adopt.

What some people sometimes do not pay attention to, is what life is like after bankruptcy. Getting any sort of credit is tough as ones credit rating goes through the floor.

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.

Whilst chapter 7 is the most popular chapter to file bankruptcy under with about 85% of debtors filing under it, it destroys your credit rating. Chapter 13 however is an alternative that does not have quite the same disastrous effects because it is effectively a repayment plan, and as the repayments are met, so ones credit rating improves. The main drawback is that the terms of the repayment plan can make life a little tough, but no assets are sold unlike chapter 7.

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.

So it is possible to obtain a credit card after bankruptcy, but with much tighter controls. Remember that it is a means to an end, to get your credit score back to a respectable level.

by: Bob Tremerituus.

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