Bankruptcy can be a useful tool for individuals to get out from under overwhelming amounts of debt. The issue that most people have with bankruptcy is that it does affect their credit score. A person can rebuild, credit, however. most people do rebuild it following a bankruptcy.

To help rebuild credit, some choose to use secured credit cards. Secured credit cards, according to Forbes, can help improve a person’s credit score.

Secured credit cards and what they are

Lenders provide secured credit cards to borrowers that may have a poor credit history. This includes those who filed for bankruptcy recently. The card has a security deposit and the point of the said deposit is to protect the creditor in case the borrower cannot pay. This deposit is also a person’s credit limit or the amount that a person can charge to the account. Creditors report the activity on secured credit cards to the three largest credit reporting agencies.

Secured credit cards and how they work

To obtain a secured credit card, borrowers fill out an application. Following the application, the lender will perform a credit check. Most people who have had credit cards know the process of obtaining an unsecured card. With a secured card, however, a borrower must supply bank information for the security deposit.

Once the bank accepts the deposit, the credit card performs like a basic credit card. Every month, the borrower pays the bill. To avoid interest fees, it helps to pay the balance every month. If a person decides to close the account, he or she may receive the deposit back.