The average person depends on credit to maintain their standard of living. Whether you need to buy a birthday gift when there’s no wiggle room in your budget or you need to replace your vehicle unexpectedly, being able to qualify for credit is crucial.
When you file for bankruptcy, all of your existing lines of credit will be subject to closure or to reaffirmation requirements. Revolving lines of credit will typically close in a bankruptcy filing, which means you need to apply for new loans or credit cards after your discharge.
How long will it take you to become eligible for credit again after a bankruptcy?
Most people can get credit cards in the first year after discharge
Credit cards can be a source of people’s financial woes, as they overspend and then end up paying exorbitant interest rates. The charges and fees add up and leave someone with an insurmountable amount of debt.
Discharging the balance out on your credit cards can free up hundreds of dollars each month, but you will have to adjust your standard of living to reflect the lack of credit available to you. Many people can get a new credit card within a few months of their discharge. Financial institutions often send credit card solicitations to those who have recently completed bankruptcy.
Although you may need to make a deposit, accept a higher interest rate or pay an annual fee, obtaining a new credit card and keeping it paid off monthly will go a long way toward helping you rebuild your credit.
What about bigger lines of credit?
You may not worry about a credit card for monthly expenses but rather worry about whether you will need to replace your vehicle or move to a new home after filing for bankruptcy.
The good news is that people who start rebuilding their credit will often qualify for a bigger loan, like a mortgage or vehicle financing, within a few years of their discharge. After the bankruptcy comes off of your credit report, you will no longer have any significant limitations on your credit eligibility.
Understanding how to qualify for and make use of credit after your bankruptcy will help you use your discharge for a better financial future.