Card options expand when bankruptcy falls off credit report

Opening Credits columnist Eric Sandberg
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for

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Question Dear Opening Credits,
A bankruptcy clears off my credit report Sept. 22, 2016. My credit score today shows 670. Should I apply for a secured credit card after this date to re-establish? – Roberta


Dear Roberta,
How fantastic! After 10 years with the bankruptcy blinking on your file like a big, red flag, you can finally move on. Soon no one will ever know that you discharged your debts unless you confide in them, nor will the notation be calculated into your credit scores. Not that it’s doing too much damage any longer. When it comes to credit scoring, what you've done in the past year or two is far more significant than activity that occurred many years ago.

After filing, you must have been treating other obligations that have appeared on your reports responsibly or your scores wouldn't be as positive as they are. When the bankruptcy notation is gone, your scores may increase further, but they’re high enough now that a large number of credit card accounts should be available to you at this time.

As you can see in this listing of credit card offers for people with fair credit, which includes scores in your range, you’ve got plenty of options from which to choose. Many of them have no annual fees and come with great rewards programs. With a steady income plus no or low debt, you should be eligible for the majority of accounts in this category. You can use the CardMatch tool to see which cards you are likely to qualify for today.

You asked about secured credit cards, though, and there is nothing wrong with them. In fact, they’re great for people who are trying to establish a credit history or who need to recover from past problems. Because your scores are pretty decent, I doubt you need to start with a secured card, but there are reasons you may want one. First, the chance that you’d qualify is extremely high. No futzing around, wondering if you’ll be rejected and then have a useless hard inquiry on your reports (too many of those will decrease your credit scores).

Second, secured cards demand a security deposit, which can act as a guaranteed savings account for you. It may be comforting to lock up some cash, since you’ll know you have it in case a crisis comes up. To break the emergency glass and claim the funds, all you’d need to do is close the account with no balance or fees owed.

The key is to choose a credit card based on your desires as well as your level of creditworthiness.

That said, if you are aiming for a card that requires an excellent credit rating, wait for the bankruptcy to be purged and then follow this simple plan: Get the best card you can qualify for, use it regularly, pay on time and never carry over a balance. All that will be listed on your credit reports and your credit scores will improve as the months pass. When your scores are in the mid-700s and higher, go ahead and check out the premium credit card deals – at least a few should be strong contenders. The caveat, as always, is that issuers don’t just use credit scores as a way to determine – your overall financial well-being is assessed. What are the issuers looking for? Evidence that you’re a low risk borrower who can easily cover any debt you can rack up with the card.

See related: Boosting credit after a discharged bankruptcy, Bankruptcy should be automatically removed from credit reports

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Updated: 03-23-2019