After my fiancé and I split three years ago, I was forced into bankruptcy. Several thousands of dollars in debt and a breached apartment lease left me scrambling to find ways to pay the creditors and fix my plummeting credit score. Unfortunately, the lifestyle we were living with both of our incomes exceeded what I could afford on my own. After meeting with a lawyer, I threw my hands up and decided to file a Chapter 7. I was young- very young. So young, in fact, that the judge that heard my case looked at me with disgust, shaking his head in dismay. Oh well- you live, you learn.
Two and a half years later, my credit is back on the right track. It didn’t get there without some work on my behalf, though. Months of research and looking for good credit cards for those with bad credit left me utterly exhausted. Fees, fees and more fees- it soon became clear that in order to get a line of credit in my name without a cosigner I would be paying hundreds in fees. It seemed that way pretty much across the board. In fact, most cards offered a measly credit limit of $300 or so, with $225 in fees before you even got the card. It put me off at first, but there wasn’t a card for which I was qualified that didn’t feature some kind of hefty fee schedule.
Most of the cards came from banks I’d never heard of, with the exception of Orchard Bank- which was owned and operated by HSBC, one of the nation’s biggest credit card companies. The Orchard Bank card offered lower fees than the other cards- about $100 to start up the account, as opposed to more than twice that with many others. The interest rate was reasonable, too- 11.9% at the time I applied. The credit line was $400 total, and after I thought long and hard about it, I realized that this was probably a good thing because having a big line of credit in my name may prove to be too much temptation right away. I signed up for the card, and am still happy with it.
The other card I fell in love with was the Salute Visa Card, issued by Urban Trust Bank. I never heard of the bank before, but in hindsight, the card turned out to be a great thing. With an initial credit limit of $350, a $150 annual fee for the first year, $25 account set up fee and $75 one time issuance charge, the fees were as hefty as any other card- $225. The annual percentage rate was 10.9%- pretty good for an unsecured bad-credit card. I was sent a new card within a week with $125 of available credit at the time. Sounds bad- but again, when you screw up your credit and file a bankruptcy on several thousand dollars of unpaid debt, you can’t blame the banks for getting as much out of you up front as they can, right?
I paid the account on time each month, except for once. The minimum payment was only $25, much lower than most other cards at $30, $40 or even $50. I don’t recommend not paying it off each month, but it’s nice to know that, in case of emergency, the minimum payment is low enough to handle with ease. The greatest part about this card is their frequent reviews of your payment history. I got the card exactly one year ago and my limit has gone from $350 to $1000 dollars. I was charged an annual fee of $150 a month ago, but the bank actually credited me back $50 of that. What bank does that?
I was late with Salute just one time, but only by a few days. While I was charged a late fee of $25, they actually increased my credit limit by $50 so I could avoid an over-the-limit fee due to my good payment history. The kicker? They’ve done it without so much as a phone call from me. Talk about good customer service!
I also took out a small unsecured loan from a local bank for $1500 to put a down payment on a car. I went for unsecured because it looks better on credit. I did, however, have to have a cosigner for that one.
If you’ve just filed bankruptcy, or are considering it, it’s not a death sentence. You must, however, manage your money wisely after it’s discharged- otherwise you’ll end up back in the same place you were before you filed- only this time, you won’t have the option to file again.
My recommendations? Understand that in order to obtain post-bankruptcy credit, you will have to pay more. If you think about it, it’s only fair- those banks are taking a big risk on you. Pay on time each month, don’t ring up the totals and you should be in good shape in the coming years. Make sure you look at the interest rates if you don’t plan on completely paying down the balance each month. Anything under 13% is decent for a bad- credit card.
Be careful about the decisions you make. Don’t let yourself be tempted to screw up again. For me, that includes taking control of my own finances- and not depending on someone else’s income to pay my own bills. At the time, it seemed like we’d be together forever. Hindsight is twenty-twenty, people.