Q: I am looking for a credit card that offers cash rewards, with no annual fee. I filed for bankruptcy in 2004, but my credit scores are in the 680s.
Q: I am looking for a credit card that offers cash rewards with no annual fee. Which credit card company do you suggest that will give me the best rewards? I filed for bankruptcy in 2004, but my credit scores are in the 680s. I currently have a Capital One card, but they are charging me a $39 annual fee. If I do get a different credit card and cancel the one that I have, will it hurt my credit scores?
A: First, congratulations on making such a strong recovery after bankruptcy. To get your credit score back above 680 with a BK on your credit report shows you've been working hard on maintaining good relationships with lenders.
Now, the not so great news. Bankruptcy laws changed in 2005, making it a little bit harder for consumers to qualify for a full discharge. Even after a clean slate from Chapter 7, that "BK" notation will stay on your credit report for a full 10 years.
That's important, because many lenders reserve their best cash back credit cards for applicants with pristine credit. For instance, Chase and American Express rarely open accounts for post-bankruptcy applicants. You've already discovered that Capital One offers a safe haven for consumers like yourself, since they use their own risk analysis system to determine whether you'll likely face another bankruptcy in your future.
If you're willing to put a little of your own cash on the line, you could find what you're looking for with a secured credit card. Typically, banks and credit unions offer "no frills" versions of their popular cards in exchange for an annual fee, plus a security deposit left in a savings account or a CD. I'd look at opening a secured credit card from a lender that offers the kind of no-annual-fee rewards card you'd like to have in the future. Bank of America and Wells Fargo both offer secured cards at reasonable rates, with a routine account review program that can qualify you for better perks after a year or two.
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