Broken credit cards: Applying for a credit card after bankruptcy

Bankruptcy negatively affects your credit score, so being accepted for credit won’t happen overnight.

You must rebuild your credit and show that you are a responsible borrower before lenders are likely to accept you.

And although getting a credit card after bankruptcy is achievable, beware of low limits and high interest rates.

Can I get a credit card in bankruptcy?

Just to make it clear, if you declare bankruptcy, you must surrender all credit cards (regardless of whether there is an outstanding balance) to your Licensed Insolvency Trustee, who will return them to your credit card issuer.

And as you might expect, a recent bankruptcy filing will make it harder to access new credit.

In the early days, it’s sensible to avoid accumulating more debt by applying for another credit card, and in most cases, you will be refused because of your recent bankruptcy.

While credit card providers consider your employment, income, debt to credit ratio and debt to income ratio to assess your creditworthiness, they are likely to consider you a high risk for two reasons:

  • A record of your bankruptcy is recorded on your credit report.
  • When applying for any new credit over $1,000, it is a legal requirement to inform lenders that you are bankrupt.

See also: How will filing for bankruptcy affect my credit score?

However, credit cards are useful tools in several situations, like booking a flight, reserving a hotel room or renting a car. It is also the fastest way to build your credit.

Credit cards offer many benefits, so during or after your bankruptcy, you might want to use a secured credit card.

Secured cards are an excellent way for people with low credit scores to improve their credit, but they do require you to put down a cash deposit.

Your deposit usually determines your credit limit. For example, if you deposit $400, you’ll typically be given a limit of $400. Purchases are not deducted from your deposit, and you make repayments like a regular credit card.

A secured credit card reports payment activity to credit bureaus, meaning you can use the card to improve your credit score.

See also: How to rebuild your credit after bankruptcy

Can I get a credit card after bankruptcy?

Once you are discharged from bankruptcy, you can apply for a credit card, but approval won’t be easy until you re-establish your credit.

Credit bureaus record your bankruptcy, which will remain on your credit report for six to seven years after completion. After this time, it will be removed from your credit report.

Although a credit card is the best way to rebuild your credit, there are alternatives that offer similar benefits.

1. Secured credit card

A secured credit card is a good alternative to a regular credit card, especially if you want to rebuild your credit after bankruptcy.

When you apply for a secured credit card, you must put down a cash deposit when you open the account. There is less risk to the credit card issuer by paying a deposit as they are protected if you default.

As discussed earlier, the deposit you put down usually determines your credit limit.

Once you have paid the deposit, secured credit cards work the same way as unsecured ones: they are accepted just like a regular credit card.

Use it to make small, sensible purchases and pay your balance on time and in full every month to help rebuild your credit. Like a regular unsecured card, you are charged interest if you carry a balance.

Your activity is reported to the credit bureaus, so use the card responsibly to increase your credit score. Likewise, missed or late payments negatively affect your credit score.

When your credit has improved, you can upgrade your secured credit card to an unsecured one, and the issuer will refund the deposit.

2. Prepaid credit card

With a prepaid credit card, you must deposit money onto the card, and you can spend whatever amount you have added. Once the balance is spent, you must add more funds.

Bear in mind that there is usually a fee to add money to a prepaid card.

Prepaid credit cards cannot help you build your credit because they do not report to the credit bureaus.

3. Debit card

A debit card is a simple but effective way to pay and manage your money, although you don’t have a line of credit, and the money is taken immediately from your bank account during the transaction.

Using a simple debit card can help you live within your means and adopt healthy spending habits.

4. Authorized user of a credit card

A friend or family member can make you an authorized user on their credit card. This helps repair your credit, and your poor credit history will not damage theirs.

The primary cardholder is liable for the account, so there must be a bridge of trust between both parties.

5. Unsecured credit card

By using a secured credit card and building up a pattern of responsible borrowing over time, you should be able to improve your credit score and convert it to an unsecured card.

However, if your bankruptcy is recent, you’ll likely be offered credit cards with low limits and high interest rates. A higher credit score allows you to access better credit card offers.

See also: Credit score ranges in Canada

Should I apply for a credit card after bankruptcy?

Before you consider applying for a credit card, you should check your credit report to ensure no mistakes after your bankruptcy. If any errors appear, notify the credit bureaus.

If you apply for a credit card before you are eligible, you will be rejected, which can further hurt your score.

Although a credit card is useful to build credit, you should never use it to help with cash flow, as this is the type of behaviour that could see you fall back into financial difficulties that caused your bankruptcy in the first place.

If you decide to apply, look for a credit card with:

  • A low credit limit.
  • A low-interest rate.
  • No annual fee.

Finally, always ensure that you pay your balance on time and in full.


Credit cards are a great way to rebuild your credit score, but they need to be managed responsibly.

Rebuilding your credit after bankruptcy can be achieved by using a secured credit card. Use it sensibly and pay your balance on time and in full every month.

By doing so, your responsible behaviour is recorded by the credit bureaus, and your credit score will start to improve.

Be patient, and don’t overextend yourself. As you will learn during your financial counselling sessions and through our credit score hub, re-establishing credit takes time.

Be mindful that you don’t return to the bad habits that caused you financial problems in the past.

If you haven’t declared bankruptcy yet, connect you with a Licensed Insolvency Trustee who can determine the best way to resolve your debts, often without declaring bankruptcy.

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