Judging by statistics, people with credit problems have a lot of company! Unfortunately, many of us are never given the opportunity to develop good credit strategies--we have the credit before we know how to use it. It's also unfortunate that you can't just refuse to work with credit altogether. Most of us are going to need good credit to help us make major purchases like a car, a home, or an education.
With credit, little mistakes can quickly snowball into big problems, and before you know it you feel like there's no way out of the credit trap. When your credit problems are out of control, it's time to look into filing for bankruptcy to help you get a fresh start. Remember that bankruptcy can help you get rid of credit card debt permanently. Once you have unloaded this burden, you want to make sure you're protecting yourself post-bankruptcy. To help you make good on your fresh start, ask yourself these important questions:
- Who's the bank? Credit card accounts are issued by banks, and the bank offering you credit should be readily identifiable from their mailings. If you can't tell which bank sent it, don't apply; the offer may be part of a scam.
- What are the terms of the offer? Don't skip reading the fine print! This is usually where you'll find the details of fees, interest rates, grace periods, and other key information you most definitely want to have about a credit card. With the changes being made in the credit industry by the government, this information should be easier to find out, but you should still make a point of reading all the materials they send you carefully.
- Is the interest rate quoted in the offer current? Sometimes the interest rate in the letter you receive is not up to date. To find out the answer to this question, you should call the bank offering the card.
- Is the interest rate fair? Remember that whatever your financial history, you deserve a fair deal. A company that's charging you too high an interest rate is trying to take advantage of you, and you shouldn't let them, even if you're starting to feel a little desperate. Panic has no place in the slow and steady work of reaching financial health.
- Are fees, penalties and other terms fair? The considerations for the interest rate also apply to fees and penalties. If these are too high on all the offers you're eligible for, it's not a bad idea to look for some other ways to rebuild credit. Eventually, you will receive a fair offer, so don't just jump on the first one you get. Watch out for credit card offers that draw you in by offering a low interest rate and then, once you've applied, they offer a fishy excuse for why you don't qualify for the old rate anymore.
- Which terms are subject to change? What will trigger such changes? Make sure you know full well if the bank will be able to raise the interest rate, drop your credit limit, or close the account altogether. Generally, card creditors can and WILL employ these tactics. Sometimes even one missed payment will be enough to raise your interest rate significantly. Everyone makes mistakes, so a credit card offer that seems almost too good to be true but has overly strict or unfair policies about missed payments may not be the way to go.
After your bankruptcy discharge, it is extremely important to obtain small amounts of new credit so that you can gradually rebuild your credit history. However, you also must proceed with caution, avoiding mistakes whenever possible. Study all your options carefully to make an informed and measured decision.