To qualify for credit cards after bankruptcy, you need to patiently rebuild your credit score and overall financial health. Let’s walk through your options for getting a credit card after bankruptcy in Canada.
Are there credit cards that accept bankruptcies in Canada?
If you’re actively in the bankruptcy process, you must give up your credit cards. So, there are no credit cards that accept (current) bankruptcies in Canada.
Avoid applying for credit cards or using existing cards immediately before filing for bankruptcy, as this could be seen as intending to defraud creditors and your credit card debt might not be discharged.
How long after bankruptcy can I get a credit card?
Once you’re out of bankruptcy—a process that usually lasts between 9 and 36 months—you likely won’t qualify for a regular credit card for years. Your first bankruptcy stays on your credit report for 6 or 7 years (14 years for subsequent bankruptcies), so card issuers will see you as a high-risk applicant and your credit score will be severely hurt.
It’s possible to get a credit card after bankruptcy in Canada if you apply for a secured credit card or prepaid card, which are easy to qualify for.
Secured credit cards after bankruptcy: Rebuild your credit
Secured credit cards require an upfront deposit, which becomes your spending limit and collateral if you miss a payment.
Importantly, secured credit cards appear on your credit report. Making payments on time and in full will improve your credit score and help you qualify for an unsecured card down the road.
The best secured credit cards after bankruptcy come with easy online applications and user-friendly apps for monitoring your transactions and credit performance.
Other cards after bankruptcy
Unlike secured credit cards, prepaid cards and visa debit cards aren’t reported to credit bureaus and won’t help rebuild your credit score. But you might consider these options if you need a card that’s easy to get and can be used for non-cash transactions.
Prepaid cards
Prepaid cards don’t come with a lot of rewards or benefits but are convenient if you want to shop online and can’t get a regular credit card. Electronically transfer funds onto your prepaid card, and use it wherever Mastercard or Visa are accepted.
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Visa Debit or Debit Mastercard
A Visa- or Mastercard-branded debit card can often be used online in place of a credit card. A debit card draws funds directly from your bank account, so you aren’t borrowing any money or paying any interest. And it’s much easier to qualify for a debit card than a credit card.
Most big banks and credit unions offer Visa Debit cards and Debit Mastercards at no additional cost with a chequing account. Like prepaid cards, debit cards don’t typically come with rewards or perks.
Can I get any other credit products are bankruptcy?
You don’t need a credit card to improve your credit score after bankruptcy. Responsibly repaying other types of debt that get reported to credit bureaus will also help strengthen your score. Examples of alternatives to credit cards after bankruptcy include credit builder loans and bad credit car loans.
What if I need cash fast?
If you’re ineligible for a credit card and need money now, consider the following options. But be aware that some options come with a high cost.
Bad credit loans. Some lenders may be willing to grant you a personal loan despite your bad credit history. However, make sure you compare the interest rates and fees before you apply.
Payday loans. Payday loans can give you access to fast cash but come with extremely high fees and usually have to be paid back within two weeks. You should avoid using these types of loans wherever more affordable options exist.
Bank overdrafts. You may be able to get a personal overdraft from your bank if you have a long standing relationship with it. You can reach out to your bank to find out how to tap into your overdraft and learn more about what fees you’ll have to pay.
What to do before you apply for a credit card after bankruptcy
Before applying for credit cards post bankruptcy, follow these steps to prevent delays and errors.
Request your credit report. Request a free yearly copy of your credit report from one of Canada’s main credit bureaus, Equifax or TransUnion. Once you know your score, you’ll be able to figure out which cards you can apply for.
Correct any errors on your credit report. Go through your credit report with a fine-toothed comb to make sure that there are no errors that could be bringing your score down even further. If there are, you can report them to the credit bureaus to have them corrected.
Call your credit card provider. You may want to call your credit card provider to find out how it handles clients with bankruptcies. You can ask about the minimum credit score requirements you’ll have to meet to qualify for the card of your choice, and see if they make exceptions for approving bankruptcies in certain situations.
How to apply for credit cards after bankruptcy in Canada
You can follow these steps to apply for after-bankruptcy credit cards in Canada:
Figure out which credit card you want. Compare credit cards after bankruptcy from a number of providers to find the one that best suits your personal situation.
Make sure you meet eligibility requirements. Double check that you meet income requirements and credit score criteria for your chosen credit card before you apply.
Apply for the card of your choice. Apply for the credit card of your choice by visiting the main site of the provider you’re interested in.
Fill out application details. Fill out personal details such as your full name, address, email and phone number to start your application.
Authorize a credit check. Submit to a personal credit check to see if you can get approved for the credit card of your choice.
Click submit. Once you’re ready to apply, click submit on your application or call your credit card provider to apply over the phone.
What to do after you receive your credit card
The tips below can help you to manage your credit card responsibly after you’ve been approved for a credit card:
Make your repayments on time. You’ll need to make all of your payments on time to build your credit score. It can help to set up automatic payments from your bank account or set up a monthly reminder on your phone to make sure you don’t miss a payment.
Pay your card in full each month. You can save money on interest and avoid your balance getting too big if you simply pay the amount you owe off every month. This can help you rebuild your credit and make sure you don’t get sucked into another cycle of debt that’s difficult to get out of.
Avoid using your card for cash advances. Try not to take out cash advances using your credit card since these often come with higher interest rates and can be difficult to pay off. If you need emergency cash, you may be better off looking into a bad credit loan (as long as the APR isn’t too high).
Keep your card balance below 30% of your credit limit. Spend only a portion of your allowable credit limit each month to show the credit bureaus that you’re in control of your spending. This can help to increase your credit score as well.
Don’t pay your credit card off with borrowed money. Avoid paying down your credit card debt with other forms of debt such as payday loans or cash advances from other credit cards. This is because your interest payments can quickly get out of hand, leading you to spiral into more unmanageable debt.
Other factors that affect your credit card application after bankruptcy
Credit card issuers weigh a range of other factors before approving or denying your request for credit. These include the following:
Income requirements. Most credit card companies specify the minimum annual income to apply for a credit card. You may not be able to qualify for more premium credit cards with a lower income, while most basic credit cards require you to make at least $12,000 per year.
Employment status. You may be required to show proof of employment to qualify for some after bankruptcy credit cards. In this case, you could show letters of reference from employers or pay stubs. Many credit card companies won’t approve applications from people who don’t have secure employment, even with a decent credit score.
Other financial information. Risk assessment processes vary between credit card issuers, but your bankruptcy will certainly be assessed along with your history of missed payments. Your provider may also ask for information about your current debts and assets.
What is bankruptcy?
Bankruptcy is the process of legally declaring that you can’t repay your debts. You must sign over all your assets to a Licensed Insolvency Trustee (LIT), a specialized, federally-regulated lawyer who discharges you from paying back what you owe.
After filing for bankruptcy, creditors can no longer garnish your wages or contact you to collect debt. Be aware that bankruptcy doesn’t eliminate all types of debt, and your credit score will decrease dramatically when you file.
Bottom line
Getting a credit card after bankruptcy in Canada is difficult but not impossible. You likely won’t get approved for a regular credit card for years until your credit score and financial health improve.
But you can apply for a secured credit card or bad credit loan to rebuilt your credit score. Alternatively, you can get a prepaid card, Visa Debit or Debit Mastercard to pay for non-cash transactions.
Bankruptcy credit cards FAQs
Your best bet to qualify for a credit card after bankruptcy is to apply for a secured credit card. You can also focus on improving your credit score, so banks see you as a less risky borrower.
The best secured credit cards after bankruptcy for you depends on your personal situation. However, some solid choices for secured credit cards after bankruptcy include the Home Trust Secured Visa or the Capital One Guaranteed Secured Mastercard.
Other than applying for a secured credit card, you can focus on rebuilding your credit with a program like the Marble Financial Score-Up program. This program uses algorithms to help you set a target credit score and devise a plan to achieve it. It also helps identify problem areas on your credit report, so you're not being unfairly penalized.
Yes, a secured credit card can help you build your credit score. These credit cards require an upfront deposit that also serves as your credit limit. Your credit card provider can use this deposit to pay off your outstanding balance if you default on your payments. Any on-time payments you make will be reported to the credit bureaus to help increase your score.
Claire Horwood is a writer at Finder, specializing in credit cards, loans and other financial products. She has a Bachelor of Arts in Gender Studies from the University of Victoria, and an Associate’s Degree in Science from Camosun College. Much of Claire’s coursework has focused on writing and statistics, with a healthy dose of social and cultural analysis mixed in for good measure. In her spare time, Claire enjoys rock climbing, travelling and drinking inordinate amounts of coffee.
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