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How to get a credit card after bankruptcy in Canada

Posted on 23 July 2021

A huge advantage of bankruptcy is being able to reset your finances, and begin afresh. It means no more debt hanging over you, and the chance to begin rebuilding your credit report and saving money. One key method of rebuilding your credit is to get a credit card. Once discharged from bankruptcy, you are able to secure a credit card, although it can be difficult to know where to start. Which bank should you go to? What is a secured credit card? In the following article, we answer your questions on how to get a credit card after bankruptcy in Canada.

Is it a good idea to get a credit card after bankruptcy?

Knowing whether or not it is a good idea to get a credit card after bankruptcy is an important question. It may have been that credit card debt is what led to your bankruptcy in the first place, or perhaps you struggle to manage your credit card limits. You may simply be wary of using a credit card again for spending. This is where credit counselling sessions can help. Credit cards can actually be one of the most effective ways of rebuilding your credit, so long as they are used sensibly. If you get a secured credit card, do not overspend, and pay off the balance in full on time. It will indicate to banks and lenders that you are responsible with your money. Subsequently, this will mean your credit report begins to improve. One thing to note is that prepaid credit card activity is not reported to credit bureaus, and therefore will not impact your credit score.

How long after bankruptcy can I get a credit card?

The end of the bankruptcy process comes about when you are discharged, and you are finally able to enjoy life after bankruptcy. It is important to remember, however, that bankruptcy will remain on your credit report for six or seven years after your discharge. This is provided it is your first bankruptcy. This does mean that some lenders and banks will think twice should you apply for a loan or credit. The good news is that it is possible to apply for a credit card as soon as you are discharged from bankruptcy. Typically, it can take a couple of years to get an unsecured credit card, but this is dependent on the lender or banks to which you apply.

How to get a credit card after bankruptcy

There are a few tactics that may increase your chances of getting a credit card after bankruptcy in Canada. Here are our There are a few tactics that may increase your chances of getting a credit card after bankruptcy in Canada. Here are our top tips:

Request a new credit report

Before you apply for a new credit card after bankruptcy, it is essential you check that your credit report is the most current and up to date. This will help to show banks and lenders accurate details of your financial history. This is easy enough to get hold of from credit bureaus like Equifax and TransUnion. Within your credit report, you will find information including credit card and loan details, the amounts owed, any missed payments, and any bankruptcies filed.

Amend any errors on your credit report

Within your new credit report, no debts should be listed following your discharge from bankruptcy – unless there are any outstanding secured debts not covered by bankruptcy. If you suspect any errors on your credit report, it is important to let the credit bureau know as soon as possible. They can then let you know what they have done to correct the errors, or confirm why the information they have is accurate.

Which type of credit card can you get after bankruptcy?

It may come as no surprise that following your discharge from bankruptcy, you can be a little limited in the choice of credit card you can apply for. That said, it is still possible to secure several different types of credit card that will help you to rebuild your credit. It is essential that you pay off your card in full each month (or at least make the minimum payment), as this will help you to build your credit report. Here are the types of credit card you can get after bankruptcy:

Secured credit cards

If you have been able to demonstrate a current, accurate credit report for banks and lenders, it is possible for you to apply for a secured credit card. The application process for a secured credit card typically involves paying a security deposit upfront of around $500. This is security from the lender just in case you should happen to default on your account. The deposit is usually around the same value of the secured credit card limit, or sometimes more. Once you have been approved, you can use your secured credit card like you would any other credit card. As with any credit card, it is important to pay it off in full and on time. After using the credit card for a few months, you may be able to get your deposit back if you have demonstrated timely full payments.

Prepaid credit cards

If you are struggling to gain a secured credit card from a bank or lender, another option is a prepaid credit card. They work similarly to secured credit cards, except you are not really receiving any credit from the lender. In fact, you must provide a deposit that will then become available through the card. It is another way of rebuilding your credit, and showing to lenders that you are able to use a credit card responsibly.

Online debit cards

Should a secured credit card or a prepaid credit card not be quite right for you, most banks also offer online debit cards. These are cards that can be used online in a similar fashion to debit cards. This means that money is immediately taken out of your bank account when you use it, and so you must have the funds in your account in order to make purchases.

Unsecured credit card

An unsecured credit card is the most common type of credit card that you are likely familiar with. While it can be harder to get an unsecured credit card after bankruptcy, it is still possible. It is also a great way to rebuild your credit. Most often, unsecured credit cards will be offered to those who have demonstrated full repayments on a secured credit card. With an unsecured credit card, no security deposit or prepayment is required. It most often means you will receive a higher balance too, and likely at a lower interest rate due to the lower risk associated.

What if you are rejected for a credit card?

It is indeed possible to be rejected for a credit card after bankruptcy, but it is important to remember that there is always a solution. At Spergel, you will be assigned your very own Licensed Insolvency Trustee to walk you through the entire bankruptcy process, and to help you get a credit card. The reason for most rejections is because first bankruptcies remain on your credit report for 6-7 years. This is when your credit report will be at its lowest, meaning that subsequently it is the hardest time to gain an unsecured card due to the risk for lenders. This is where alternatives like secured credit cards, prepaid credit cards, and online debit cards come in handy.

To learn more about how to get a credit card after bankruptcy in Canada, book a free consultation with a Licensed Insolvency Trustee at Spergel. We have been helping Canadians become debt free for over thirty years, and our trustees will walk you through the process of filing bankruptcy, as well as alternatives to bankruptcy. Reach out today – you owe it to yourself.

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