After filing for bankruptcy, your main concern is likely rebuilding your credit score and getting your financial life back on track. While at the Jones Law Firm, we suggest you monitor your credit score closely, you may wonder if there are actions you can take in the rebuilding process. If this sounds familiar, you may have completed a Google search for tips and tricks and found that “secured credit cards” can help. But do you need secured credit cards after bankruptcy?
A secured credit card uses the money you have placed in a security deposit account as collateral should you not pay your bill. Because of this, your line of credit will be based upon the money you have placed in the account--so, if you have $2,000 in your security deposit account, you have a line of credit of $2,000 and so on.
Because you are limited to the amount you can borrow based on your security deposit, secured credit cards can be a useful tool in rebuilding your credit after bankruptcy.
Much like a traditional credit card, a secured credit card can be used anywhere normal debit and credit cards can be used.
So long as you make monthly payments, you will begin to see a change in your credit score. The issuer of your secured credit card will also report your activity to the credit bureaus so you, and they, can keep track of your smart financial habits. Because these cards are reviewed periodically, you may eventually be able to qualify for an unsecured credit card which will be beneficial for you should you need to make big-ticket purchases in the future. You may also get your deposit back, too.
In addition, it not only helps you qualify for unsecured credit, but it can help you earn lower interest rates on mortgages, cars, etc.
This seems like a good idea for those coming out of a bankruptcy filing. So, should you do it?
If you do not already have a credit card that you can use and make monthly payments as a way to rebuild your credit score, you should look into secured credit cards. Most major credit card companies offer some form of secured credit cards, so start your research there.
NerdWallet releases its favorite secured credit cards often, which can be a valuable resource to you as you begin the process. In addition, the Better Business Bureau (BBB) also can provide accurate information on any company you may choose.
If for some reason you are unable to get a secured credit card or simply do not want one, a retail card from a store you visit can also help you rebuild your credit. But remember, these often have high-interest rates so limit your usage to small transactions and make on-time payments each month.
Rebuilding your credit after bankruptcy may seem impossible, but it doesn’t have to be. By making smart financial decisions and utilizing financial tools like secured credit cards, can really help you improve your credit score over time.
If you have questions on how you can begin to rebuild your credit score after filing for Chapter 7 or Chapter 13 bankruptcy, Franklin County bankruptcy attorney Michael Ryan Jones is here for you. Contact The Jones Law Firm today to discuss your Ohio bankruptcy options. Your financial future begins today.