Prior to filing bankruptcy 2 years ago, one of my store cards is the only thing that got us through Christmas. I did not list it on our bankruptcy, so the limit is high and I’ve kept up with payments, but I still have about $3500 that I want to transfer to a card with a 0% APR for 15-18 months to get it paid off. My credit is 711 and rising, but I can’t get approved, I’m assuming because of the bankruptcy. Do I have any other options?
–Looking for Loans in All the Wrong Places
Great job on getting your credit score up! That’s a huge accomplishment, especially after you filed for bankruptcy. I bet it took some hard work on your part. Congratulations!
Now let’s get down to the nitty-gritty. After filing for bankruptcy, it can be hard to get approved for certain types of loans—especially when there’s no collateral. The good news? You still have options. Let’s look them over:
Keep Your Balance Where It Is
Before you even consider applying for a credit card or loan, make sure to keep your credit card balance where it is. Take a look at the APR on that store credit card you’re using. If it’s not too high, keep the balance as-is and try paying it off as soon as you can. But if you’re anything like me, it’ll be tempting to use your card as you pay the balance. Don’t worry—that’s easy to prevent. Just cut your card in half and, to be extra careful, call the issuer and ask them to place a block on the card. Most issuers won’t have a problem doing that.
Balance Transfer Credit Cards
It’s worth trying to apply for a balance transfer card. Balance transfer credit cards are a great way to help pay your credit card debt faster and improve your credit. It sounds like you don’t need a ton of help with the latter—you did a great job bumping your score up all on your own.
Balance transfer credit cards are pretty simple. They’ll let you transfer a balance from another card and avoid interest on those charges. Balance transfer cards typically have an introductory balance transfer APR of 0% that can last up to 21 months.
Credit cards that have a 0% APR for 12 months or longer tend to be trickier to get approved for. These cards are typically reserved for good and excellent credit. It sounds like you have a credit score that falls in the good range, so you’re a step ahead! But there are other things that a lender will look at when reviewing your application. Here are a few:
- Debt to income: This is how much debt you have compared to how much income you bring in. If your debt to income is high, you might not get approved.
- Credit utilization ratio: Your credit utilization ratio is how much credit you have available to how much you’re using. Try to keep your credit utilization ratio at 30%. That means using only 30% of your total credit lines.
- Bankruptcy risk score: A bankruptcy risk score reflects how likely it is that you’ll file for bankruptcy. Unlike a credit score, the bankruptcy risk score is not sold to consumers.
Whatever you do, don’t keep applying for different balance transfer credit cards if you aren’t approved the first time. The more inquiries you have on your credit report, the more it’ll affect your credit score. If you aren’t approved you should look into other options.
You might want to look into your personal loan options. With a personal loan, you pay the same amount each month rather than a minimum payment. That’ll stop any temptation to use your card, since personal loans are a closed-end loan. Try looking at rates from local financial instructions. I suggest looking at credit unions, since they typically offer lower rates.
Personal loan APRs can be pretty high, since there’s no collateral and the only thing guaranteeing the loan is your signature. Compare the APR of a personal loan to your store credit card’s APR. If the store credit card’s APR is much lower than the personal loan, you probably shouldn’t get the personal loan. But if the personal loan’s APR is the same or within a percent or two, it might be worth it.
Whatever you decide to do, make sure to do your research. Choose what’s best for you! It might be even worth contacting a few lenders to see if they have any suggestions.
Best of luck!
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