While there are a number of positives that go along with bankruptcy, you may wonder how you will rebuild your credit after the paperwork goes through. It is true that with a Chapter 7 or 13 bankruptcy, it will take a few years to move beyond the hit to your credit score.
However, that does not mean that you cannot take some steps to expedite the process. According to NerdWallet, a secured credit card is a popular option for many seeking to improve their credit scores after bankruptcy.
What is a secured credit card?
Secured credit cards work the same way as regular, or unsecured, cards do. That is, you have a credit card in your name with a specific maximum spend on it. However, what makes secured credit cards “secured” is that you put down a deposit on the card. This deposit becomes the maximum.
Secured credit cards are not debit cards. Loadable debit cards have no impact on your credit score. Even though there is collateral on secured credit cards, the three major credit bureaus monitor them. It is also still possible for a credit card company to deny you a secured credit card.
How do secured credit cards help?
Responsible use of a secured credit card will improve your overall credit standing. You can then use a secured credit card to obtain unsecured credit cards and other benefits in the future. It is better to stick with using a 30% or less credit utilization rate to have maximum impact. Use your secured credit card for small purchases and pay them off promptly.
Bankruptcy is a chance to start fresh and learn from past mistakes. You can take responsible steps to help build your credit back faster and protect your financial future.