Declaring bankruptcy may simultaneously be one of the hardest and best things that you ever do. Going through bankruptcy can help you get the financial clarity you need to move forward with your life.
However, it can be confusing trying to figure out what the best steps are to rebuild your credit after declaring either a Chapter 7 or Chapter 13 bankruptcy. According to Credit Card Insider, adding new credit post-bankruptcy can help you on the path to financial recovery.
What is a secured credit card?
Most people envision an unsecured credit card when they think about the concept. An unsecured credit card does not require any collateral in order to use the credit. Essentially, credit card companies are trusting you to pay back any debt you occur while using the card.
On the other hand, in order to get a secured credit card, you must put down a deposit. This amount subsequently becomes the maximum on the secured credit card. So if you put down $500 on your secured credit card, the maximum amount you can charge on that card is $500. In the event that you do not pay your debt, the credit card company will take the deposit.
How will a secured credit card benefit me?
Secured credit cards report to the credit bureaus just like unsecured credit cards do. If you show that you have a consistently low balance and a habit of paying off the secured credit card every pay period, the card will report this to the bureaus.
Particularly in the direct aftermath of bankruptcy, you may only be eligible for secured credit cards. These cards are a great way to start getting your credit back on track immediately after your bankruptcy.