Bankruptcy can have long-term effects on your credit score and can make it harder to obtain credit cards and other loans. But it’s possible to get credit cards after bankruptcy if you work on improving your credit over time.
Read on to learn more about your ability to get future post-bankruptcy credit cards and compare options.
Bankruptcy is the process of legally declaring that you can’t repay your debts. You will have to essentially assign everything to a licensed insolvency trustee. A licensed insolvency trustee is the only professional who can deal with bankruptcy in Canada. They are regulated federally by the government, which makes the cost of bankruptcy more reasonable – yes, bankruptcy will cost you.
The goal of bankruptcy is a discharge, or an order from a court known as a stay of proceedings, that disallows a garnishment from your wage or eligible creditors from attempting to collect on outstanding debt. Bankruptcy is designed to be fair to both creditors and the debtor (you).
Some Canadians find themselves facing bankruptcy due to complex factors that can include overwhelming bills, unemployment, exhausted credit and divorce or separation. Bankruptcy is designed to offer a fresh start on the road to financial wellbeing – but it’s not a decision that should be taken lightly.
Like most legal proceedings, bankruptcy is complicated, requiring the help of specialized lawyers, and it won’t necessarily relieve you of all the debt you might carry. Speak to a financial professional to discuss your specific debts before deciding to proceed with filing for bankruptcy.
Don’t apply for credit cards or use your existing credit cards shortly before filing for bankruptcy. Your credit card provider can say that this credit use had “dishonest intent“, and may result in your credit card debt not being discharged. Your existing credit cards may be closed during the bankruptcy process even if they’re fully paid off.
How is my credit affected after bankruptcy?
Bankruptcy can severely damage your credit history. It affects everyone’s credit score differently, but will likely take more than 200 points off of your score.
While your first bankruptcy stays on your credit report for 6 years, a second bankruptcy will stay on your report for 14 years.
Can I get a credit card after bankruptcy?
Yes, you can get credit cards after bankruptcy, but you’ll find that you have very limited options. It can be hard to find a credit card provider that will approve you with a bankruptcy still on your credit report – many providers automatically reject applications that disclose bankruptcy.
One option that you may consider applying for is a secured credit card. A secured card can help you rebuild your credit score after bankruptcy in a few different ways:
These credit cards are designed to help rebuild your credit by requiring an upfront cash deposit that typically becomes your card’s monthly credit limit. Otherwise, these cards work in the same way that your typical credit card does.
Use your secured card to improve your credit score by keeping your credit utilization ratio below 30%. Your ratio is calculated by taking the balance of your card and dividing it by your credit limit.
Some banks and providers offer an opportunity to convert your secured card to an unsecured card after you’ve proven you can manage credit. In this case, your deposit is returned to you once you pay off your balance in full.
After your bankruptcy falls off of your credit report, it should be easier to find approval for unsecured credit cards after bankruptcy. If you open a credit card – whether secured or unsecured – be sure to practice good spending habits.
Compare credit cards for after bankruptcy
*How we chose our top picks for the best credit cards after bankruptcy
We’ve chosen the best post-bankruptcy credit cards on this page based on the providers available through Finder with comparisons to other select cards available in Canada. These cards are not representative of the entire market. No single card will be the best choice for everyone, so compare your options before picking your new card.
Secured credit cards for building credit
Refresh Secured Card
With this secured credit card, you can look forward to building up your credit score by making on-time payments. While it has an annual and monthly fee, this secured card does not require a credit check and comes with a competitive purchase APR of 17.99%.
No credit check. This is one of the rare credit cards in Canada that requires no credit check – but this doesn’t mean you won’t have to be open and honest about your past bankruptcy when applying.
Control over your credit limit. The amount of security deposit you offer up will determine your monthly credit limit, which means you can control whether you have a high or low credit limit. Credit limits range from $200 to $10,000.
Competitive purchase rate. This card has a purchase rate of 17.99%. This interest rate can easily be avoided by paying off your balance in full each billing cycle.
Free education. Refresh Financial offer access to free educational financial training on their online portal called Refresh f.i.t, which includes informationregarding finances, money and tips on building up your credit score.
Annual and monthly fees. There is an annual fee of $12.95 a year, with an additional fee of $3 per month for the card. Altogether, this card will cost you $48.95 in fees.
Paying late. Paying off your balance in full means you can avoid interest rates. If you don’t pay in full however, you’ll be looking at an interest rate of 17.99%.
Monthly inactivity fee. Should you not use your credit card for a billing cycle, you’ll incur a $2 inactivity fee.
Home Trust Secured No Fee Visa
Home Trust offers a secured visa card that allows you to choose the best option for your needs: choose a no annual fee card that comes with a purchase rate of 19.99% APR, or choose a lower purchase rate of 14.90% with an annual fee of $59 (or the option to pay $5 per month).
No annual fee option. If you choose the no annual fee option, you’ll save $59 annually – but watch out for the higher purchase APR of 19.99%.
Low interest rate option. Should you choose the low rate option, you’ll get a purchase rate of 14.90%. However, you’ll have to pay an annual fee for this option.
Control over your credit limit. The amount of security deposit you offer up will determine your monthly credit limit. Credit limits range from $500 to $10,000.
Credit check. Home Trust will check your credit report for this card, however approval is typically high.
No annual fee option. The no annual fee option comes with a higher purchase rate of 19.99%.
Low interest rate option. The low rate option comes with an annual fee of $59, or a payment of $5 monthly.
Unsecured credit cards after bankruptcy for rebuilding credit
Right after bankruptcy, you likely won’t be approved for an unsecured credit card. However, after using a secured card for 1 to 2 years and paying your bills on time, your credit score may be high enough to get approved for an unsecured card.
Unsecured credit cards don’t require a security deposit and generally come with higher credit limits than secured cards. Make sure to keep up with payments and pay your unsecured card in full each month so you can keep building positive credit history. After your credit score has improved with a secured card, try applying for one of these unsecured credit cards:
No-Fee Scotiabank Value Visa Card
With no annual fees, low interest rates and a low credit limit, the Scotiabank Value No-Fee Visa Card offers reasonable features that can help you get back into the unsecured credit card market.
No annual fee. This card has no annual fee.
Low interest rates. Both the purchase rate and the cash advance rate is 16.99%.
Low credit limit. Choose a credit limit as low as $500.
Balance transfer offer. Get a rate of 3.99% on balance transfers for the first 6 months, with a 0% balance transfer fee.
Credit check. You’ll need to authorize a credit check to be considered for this card.
No rewards or cash back. This is a no-frills card designed for those who are looking to focus on getting their finances in order.
Pay your card bill on time. This is extremely important for your credit score. From now on, look to have a spotless payment record. One great tip is to set up automatic payments so you’ll never miss a due date.
Pay your card bill in full each month. Before putting another cent on your card, try to pay off your entire balance. By staying vigilant and always clearing your balance at the end of the month, you can decrease your chances of getting into another bankruptcy.
Bankruptcy can make qualifying and effectively utilizing credit cards – and any type of credit for that matter – incredibly difficult. While bankruptcy might seem like the end of the road, you still have a few options.
You may find it easier to be approved for a credit card at the bank where you keep your money. Meet with a banker at a local branch and discuss your credit history and financial needs.
Other than applying for secured credit cards, one good option is to focus on rebuilding your credit with a dedicated credit-building program, such as Score-Up, which uses algorithms to help you set a target credit score and action plan to get back on track. Score-Up can also help you to identify problem areas on your credit report so that you’re not being penalized when you shouldn’t be.
After thirty days, your credit card provider may report a late payment to the two credit bureaus (Equifax and TransUnion) and will then charge you interest on your balance, as well as a late payment fee.
After 90 days of no payments, your credit card provider may close your account, apply your deposit to the remaining balance, and report your secured credit card account to the credit bureaus as “closed in poor standing”.
These consequences can seriously harm your credit score and financial wellbeing. Make sure to stay up-to-date with payments on your secured card so you can continue to improve your credit history after bankruptcy.
Emma Balmforth is a producer at Finder. She is passionate about helping people make financial decisions that will benefit them now and in the future. She has written for a variety of publications including World Nomads, Trek Effect and Uncharted. Emma has a degree in Business and Psychology from the University of Waterloo. She enjoys backpacking, reading and taking long hikes and road trips with her adventurous dog.
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