Escaping from a pile of debt can be extremely liberating. A chapter 7 discharge can release you from credit card debt, medical expenses and other loans you have struggled with for years.
Despite the freedom you receive from erasing certain debts from your record, bankruptcy has a negative impact on your credit score. While there are some steps you can take to rebuild your credit following a bankruptcy, it is important to make sure you are not getting yourself back into trouble. According to Bankrate, there are several ways you can rebuild your credit and protect yourself.
What are subprime credit cards?
While a credit card may seem like a way to rebuild your credit, you should watch out for subprime lenders that are out to make a profit off your situation. Those who have a low credit score and may not be approved for standard credit cards might want to apply for a subprime credit card. These lenders issue cards to those with credit scores falling below 600.
What are the fees associated with subprime cards?
Lenders face a higher likelihood of loss when approving lines of credit to those with low credit scores. Due to your track record of not paying off creditors, lenders charge a myriad of fees to protect them from a substantial loss. These include high-interest rates, annual fees, authorized user fees and processing fees.
Some credit card lenders, however, have borrowers put down a cash advance before issuing a credit card. This helps to offset the potential loss and eliminates the need of charging high fees.
If you want to apply for a credit card post-bankruptcy, it is important to do your research. Find a card that is not going to charge you an exorbitant amount of fees. Make sure you pay your balance off each month to avoid getting buried in more credit card debt.