I had a perfect credit score from 1980 to 2013. I was in a terrible marriage — my husband attempted to kill me and he stole my money while running up my credit cards (He was a user on the cards, but the cards belonged to me.) From 2010 to 2013, he incurred $45,000 in debt, which I was responsible for. After paying minimums of up to $750 per month, I could no longer afford to pay. I am on Social Security disability and my annual income is $11,000-$12,000 per year. In November 2012, I declared Chapter 7 bankruptcy and was discharged of the $45,000 in January 2013. I tried to apply for five to six secured credit cards in 2013 and was denied. Do you have suggestions that will allow me to obtain a secured credit card to get my credit score back up? Thank you in advance. –Barbara Anne
Dear Barbara Anne,
I'd love to help you rebound from what has surely been a dreadful experience. And I believe you can make some serious strides financially in the right direction.
Because you built such a fantastic credit history before your husband ruined it, you already know how to manage credit cards well, and you understand what it takes to create a high score. That's great. You'll be using your acumen again — and hopefully soon.
You say that your credit was perfect up until last year, yet your husband was racking up huge obligations on your accounts over the past three years. His actions led to your very recent Chapter 7 bankruptcy. Yes, the excellent way you treated credit before this mess is still on your reports, but they also list a considerable amount of negative data, which is holding you back from qualifying for certain products. A Chapter 7 bankruptcy notation will remain in evidence for 10 years, and any late payments or collection activity that preceded it will be on your reports for a full seven.
These are details that make creditors cautious, as they indicate lending risk. You didn't pay your bills before, so how can they have confidence you'll pay them in the future? At this stage, they can't make that prediction. You'll have to jump through hoops to convince them to extend you a new card.
You were right to pursue secured credit cards: They are best for re-establishing damaged credit. However, you may have been rejected because you applied for them too soon after the bankruptcy — or even before it was finalized. In that case, the damage might just be too fresh.
The good news is that time is working in your favor. It's been just over a year since the bankruptcy went through. As the clock ticks, the past will matter less to credit issuers.
However, your means to pay is critical. At this point, your annual income is extremely limited. If it was that low when you were in the aggressive application stage, it's no surprise they turned you away. Remember, all lenders want to reduce risk — and that means they want assurance on all fronts: a pattern of responsible credit use, plus enough incoming cash to meet any credit card debt.
Therefore, you will need to start small. A secured card remains the right option, but this time, move extra slowly. Too many applications in a very short time will drive your already poor score down.
Before you try, ask companies about their income requirements. If it's beyond what you bring in, forget about it. Instead, consider piggybacking on someone else's credit. Will a loved one allow you to be an authorized user on their card? If so, you'll have a card to charge with, as well as the positive activity added to your reports. If the account is managed perfectly, your rating will climb. Then, even if all you bring in are small disability checks, you may be able to get your own, low-limit secured card after about a year of excellent use.
Once you get a card, use your dormant skills to escalate your rating: Pay on time and in full — repeatedly. In another year or so, you should rise like a phoenix from the ashes!
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