As you emerge from your bankruptcy, you are likely still leery of credit cards. The tricky part about credit, though, is that in order to rebuild your credit you must use credit. With a bankruptcy on your credit report, it can be very difficult to find a credit card with reasonable interest rates and limits—so what’s a person with an interest in rebuilding credit to do?
Previously in Bankruptcy Aftermath, we briefly touched on the idea of using secured credit cards as a relatively safe way to rebuild credit. Your spending is limited to an amount of money that you have previously deposited into a designated account, much like a regular bank account, but your payment history on the card will be reported to credit bureaus. Disciplined, regular use of these cards can help you gradually improve your credit score without much effort.
When shopping around for a secured credit card, there are some hidden dangers with these cards that you need to be aware of. Some cards have very high application fees, and are followed up by exorbitant interest rates on unpaid balances. Some cards will even charge you a significant fee if you go over your spending limit as opposed to simply declining the charge.
A good card will never ask you for an application fee, and will only charge you a small annual fee once you are approved. High interest rates on unpaid balances are standard, however, so be sure that you are able to pay your balance in full each month. Before committing to a card, make sure that it will report to Equifax, TransUnion, and Experian credit bureaus so that your hard work will pay off!
After a year or two of responsible use of the card, your score may improve enough to transition to a regular credit card. Some secured cards offer a transition to a regular credit card after a predetermined amount time following a track record of success with the secured card, or you may have the option to shop around for your own card if your credit score has improved to that point.
If you have any questions about your life after bankruptcy, or about filing for bankruptcy in general, the Phoenix bankruptcy attorneys at Curry, Pearson & Wooten are here to help! Call us today at 602-258-1000 and speak with a lawyer now.