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Law Office of Gordon Mosley
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Rebuilding credit after Chapter 7 with a secured credit card

People in Tyler may want to file for bankruptcy, but may be concerned about how it will affect their credit. While it is true that a person's credit score will take a hit after filing for Chapter 7 bankruptcy, it is not something that cannot be overcome with time. In fact, it may even be possible to obtain a credit card after completing the Chapter 7 bankruptcy process.

After bankruptcy, a person may be able to obtain a secured credit card. By paying off this credit card on-time each month, a person can begin to rebuild their credit. Credit cards with small limits, such as $1,000, are a relatively small risk when compared to larger loans, such as a home loan. Therefore, financial institutions may be more willing to provide someone who has completed the bankruptcy process with a secured credit card, rather than a larger loan such as a mortgage. In addition, credit card companies will report payments the cardholder makes to credit bureaus. This too can help a person increase their credit score.

It will take 10 years for a Chapter 7 bankruptcy to be removed from a person's credit report. Therefore, by rebuilding credit it can show that you can spend responsibly, budget and pay back your debts. If you don't try to rebuild credit following bankruptcy, lenders will not have any proof as to how you are handling your money, which may make them hesitant to lend funds.

One way to begin financially after bankruptcy is to obtain a secured credit card. To obtain this type of card, the borrower must put down a deposit. This deposit serves as the credit limit. Of course, if the payments on a secured credit card are not made on time, this could damage a person's credit score and result in extra fees being levied. It may be wise to make smaller purchases each month using the secured credit card, and then pay the full balance on the card each month.

Sometimes, after a certain amount of time of making timely and full payments on a secured credit card, a person may eventually be able to obtain an unsecured credit card. In the end though, by taking steps to rebuild your credit after bankruptcy, it could make it so you can move forward on a good foot financially and after a period of time be eligible for larger loans.

Source: The Motley Fool, "Credit Cards After Bankruptcy," Jordan Wathen, Oct. 9, 2017

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Law Office of Gordon Mosley

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4411 Old Bullard Rd.
Tyler, TX 75703

Phone: 903-266-1843
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Gun Barrel City, TX 75156

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