One question that comes up a lot is: Should I get credit cards as soon as my bankruptcy gets discharged so I can rebuild my credit?
Here Are The Reasons You May NOT Want to Get Credit Cards Immediately After Bankruptcy Discharge
- If your bankruptcy was due to being irresponsible with money and running up charges well beyond what you could afford and if it was largely for consumer items (shopping at malls, buying too much online, etc.) then I would recommend sticking with debit cards for a while so you make sure you learn how to control your spending urges.
- If you have a very low monthly income that will not be changing any time soon, such as fixed social security or disability income, then I would recommend staying with a debit card.
- If you have no need to get a car or home loan anytime soon, then use a debit card for a while.
Here Are The 4 Reasons To Ever Obtain a Credit Card
There are only a few reasons to use credit cards in general, if these don’t apply to you then you don’t need credit cards. In short, credit cards are good for the following things:
- Building your credit score and history
- Earning rewards (such as 2% cash back)
- Increased security as all charges can be disputed and generally removed immediately if any charges that are not yours come through.
- Cleaner money management. If you are a family you probably have 25-75 card swipes per month. All of these being listed on your bank statements and online account can be a bit overwhelming. It’s usually a lot cleaner to put all the small charges on a credit card and then just make one payment per month (for the full balance!) to the credit card to pay it off without paying any interest. Then your bank account will generally be fairly clean, and it will just have your income deposits and a few outgoing payments per month (for example, 1 payment to the credit card, 1 payment for a car, 1 payment for rent/mortgage)
Here Are Some Reasons To Get Credit Cards Immediately After Getting Your Bankruptcy Discharge
- You can immediately start rebuilding your credit so that in 1-2 years you’ll be able to get a reasonable rates on car loans.
- If you want to buy a house in the future with a mortgage, you’ll need to rebuild your credit to get a good rate.
- If your bankruptcy was due to one time circumstances it can be a good idea to start rebuilding credit quickly (such as a business failure, large medical debts, divorce debts, etc.) Basically if the reason for your bankruptcy has virtually no chance of repeating itself, it can be a good idea.
- If you have a solid income from a job and are starting clean with no debts it’s helpful to get a couple credit cards with no annual fee and just charge small amounts to them and pay them off to rebuild for the future.