I’ve previously been bankrupt

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Options If You Are a Discharged Bankrupt

Trying to get a credit card or any other form of credit if you have had severe problems in the past, such as Bankruptcy, can prove difficult and it is a criminal offence to apply for a credit card if you are an undischarged bankrupt. Assuming you have been discharged from bankruptcy, your eligibility for a credit card will partly depend on your credit score and the amount of debt that you are still repaying. It’s worth pursuing though, as the main advantage of obtaining a credit card after Bankruptcy is to re-establish your credit rating. Obviously restraint and common sense is required when using any card, but used properly and wisely, it can be a powerful tool to help you improve your Credit Score.

If the discharged bankruptcy and any other adverse credit history including CCJs were incurred more than five years ago you stand a good chance of getting a credit card. If you are still repaying past credit then your eligibility for a credit card will depend on a number of factors. Your credit rating will be taken into account, so if you regularly make late payments or miss payments altogether you may find that you are still turned down for many credit cards. The level of debt that you are in, along with the amount that you pay out on your existing debts, is also taken into account.

So if you were declared bankrupt, but have been discharged for more than five years, what credit card options are available? Your eligibility for a credit card will depend on a number of factors:

  • Your credit rating. So if you regularly go over your credit limits, make late payments or miss payments altogether you may find that you are still turned down for many credit cards.
  • Your current level of debt, often known as your indebtedness. Lenders may also take into account the amount that you repay every month on your existing debts.
  • If your other bills and accounts such as gas, electricity, phone, TV and catalogue are in good order.

It’s worth periodically checking your own Credit Record using internet-based services to make sure that the information lenders see is accurate and up to date. See ‘Check Your Credit Rating’ for more information as to how you can do this. If you don’t have email or access to a computer, you can write to the Credit Reference Agency which must reply to you within seven working days. If the information is wrong you can demand that it is changed or removed.

It’s probably a waste of your time approaching the regular card providers as they will almost certainly turn you down. Instead, approach some of the companies that specialise in the provision of 'Bad Credit History Credit Cards'.

These providers will still carry out a credit check, but they will try to understand your individual circumstances and are willing to consider people with a poor credit rating, especially if you have experienced credit problems like bankruptcy or CCJs some time ago. Even with these providers though, nothing is guaranteed.

Although interest rates on these bad or 'Poor Credit History Credit Cards' are higher than on standard cards and credit limits tend to be lower, approaching these specialist lenders is a far better option than risking rejection from mainstream credit card providers. These cards can also help you to rebuild your credit rating over time by demonstrating that you can successfully manage your credit commitments and you’ll eventually be able to apply for ‘Regular’ credit cards. Although acceptance can never be guaranteed, you do stand a much better chance of success with these 'Poor Credit History Credit Cards'.

The other option for people who have been declared bankrupt is a Prepaid Credit Card. There’s no need for a credit check and they do not have a line of credit to tempt you. They don’t help re-establish your credit rating as there is no credit involved and the card issuers do not report into the Credit Reference Agencies.

A couple of prepaid cards can help you to strengthen your credit file by giving you a very small ‘loan’ (equal to or less than a year's worth of monthly fees). As long as you repay the loan each month by paying your monthly fees, you’ll boost your credit rating by showing lenders that you are a responsible borrower. For example, they may ‘Lend’ you £60, which you pay back by paying your £5 monthly fee every month. However, these may only available once you are a discharged bankrupt.

These prepaid credit cards are not ‘Regular’ credit cards since it’s your own money you are spending, but one big advantage is the fact that it’s impossible for you to go over limit on the card. Prepaid credit cards offer the security, flexibility and convenience of a credit card, especially if you are making purchases on the Internet, without the worries of debt or overspending.

Next Steps

  1. Leave 5 years after you’ve been discharged before applying for credit
  2. Check your credit rating
  3. Approach a credit card provider who specialise in helping people who have previously been turned down for credit
  4. Pay all your bills on time
  5. Never apply for a credit card if you are still declared bankrupt

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