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Can I get a credit card if I’m bankrupt or still repaying debt?
It's possible, but approval can be very difficult.
It’s possible to get a credit card if you’re bankrupt or still repaying debt. However, getting approved can be very difficult given a severely damaged credit report. If you want a card, consider one whose issuer doesn’t require a credit check.
Beyond whether it’s possible to get a credit card, consider whether it’s a good idea to get one. This mostly depends on whether you feel you’re ready to use your card responsibly.
Should I get a credit card if I’m bankrupt?
If you file for Chapter 13 bankruptcy, it’ll stay on your credit report for seven years, and Chapter 7 bankruptcy will hang around dragging down your score for 10 years. Before you apply for a credit card, ask yourself the following questions:
Am I eligible?
As most credit cards require applicants to have a good credit history, you may need to work on improving your credit score before you apply for a new card. You can request your credit score for free through finder.com and check out our guide to credit repair for tips on bringing your score up. Note that it will hurt your score if you apply for a credit card before you’re ready and are rejected.
What type of credit cards should I compare?
If you’ve built up your credit score and think you’re eligible to apply for a credit card, you should still weigh your options. A credit card can be a useful way to build your credit and free up your cash flow, but there are risks of falling back into debt if you’re not careful. If you do apply for a credit card, consider:
- A low-cost card.
A credit card with a low or 0% purchase interest rate and no annual fee will help you keep your costs to a minimum.
- A card with low-income requirements.
You might have an easier time getting approved if you apply for a credit card with low minimum income requirements. Keep in mind that these cards could have lower limits.
- A joint card.
If you have a relative or spouse with good credit history, you might be able to open a joint card. They would be the primary applicant, but you could share their account and develop better spending habits.
- A secured credit card.
When you have bad credit, a secured credit card might be your best chance to gain access to credit. These cards are backed by a cash deposit allowing approval for those with lower credit scores. Secured cards can also be a great way to build your credit.
What about existing credit card debt?
If you’re not bankrupt but are struggling to pay off an existing credit card, you could consider moving it to a card with 0% interest on balance transfers for a promotional period. Depending on the card, you can pay off your debt with no interest for up to 12 to 25 months, or sometimes longer. It’s important that you stick to a payment plan and clear the debt in full within this time, as any remaining debts usually attract the much higher rate.Back to top
Alternatives to credit cards
If you’re ineligible for a credit card, consider some of these alternatives:
- Personal 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. You can compare loans that are suitable for applicants with bad credit on finder.com.
- Cash advance loans.
Also known as payday loans or bad credit loans, these are short-term loans of up to $2,000 with fixed fees. Again, make sure to pay attention to the interest rates and fees.
- Bank overdrafts.
You may be able to get a personal overdraft from your bank if you have a long banking history with them.
- Debit card.
If you want the convenience of paying on a card, you can use a debit card instead of a credit card to ensure that you only spend money you have, which will help you avoid more debt.
- Prepaid card.
A prepaid card allows you to load money in advance, like a gift card. You can then use it anywhere credit cards are accepted.
Mistakes to avoid with a credit card
If you’re considering getting a credit card, avoid these common mistakes:
- Submitting too many applications.
Each application results in a hard inquiry on your credit file, which results in more points deducted from your credit score. Future lenders may also interpret your numerous attempts to obtain credit as an act of desperation and poor management of resources. Instead, compare your options and make sure you’re eligible for one card before you apply.
Make sure to apply for a reasonable credit limit that won’t tempt you to spend. You may also want to keep your credit card for emergencies only or stick to a monthly budget you know you can repay in full each statement period.
- Incurring more debt.
Having one more credit card increases your likelihood of getting into even more debt. Aim to pay off your balance by the statement due date each month so that your debt isn’t growing with interest.
- Not paying your card bill on time.
Payment history is a significant 35% of your FICO score. Getting this factor working in your favor is as simple as consistently making your required payments by your due dates.
Compare secured cards
If you want a credit card at this point, a secured card can be a good place to start. Because you have to put down a security deposit to get approved, issuers may be more likely to approve you. If you’re still having trouble getting approved, consider a secured card with no credit check.
Once you get your secured card, take care to make payments on time. Also, keep your balance at a reasonable level — ideally, under 30% of your credit limit. If you use your card responsibly over an extended period of time, you can see a steady rise in your credit score.
Your chances of getting a credit card depends on how long ago you experienced financial hardship and what your credit rating looks like now. The longer you can wait to apply for new credit, the better your chances will be of getting your application approved. If you’re still struggling to repay your debts, a new credit card isn’t likely consider your alternatives and work on repaying your current debts first.
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