Getting through bankruptcy is difficult enough, but moving forward can also present its own challenges. Whether you have filed a Chapter 13 or Chapter 7 bankruptcy, it will stay on your credit record for a number of years. It is intelligent to start the path to financial recovery as soon as possible.
You might find it surprising that credit cards can be a key element of rebuilding your credit. As per NerdWallet, a secured credit card can be a cornerstone of your credit rebuilding agenda.
What is a secured credit card?
When most Americans picture a “credit card,” they are thinking about an unsecured credit card. Unsecured credit cards involved the credit agency giving you a line of credit that you can spend and pay off at will. Many people get in trouble with unsecured credit cards because you can use them as you please and there are no limits attached to them other than the maximum. This often leads to debt.
A secured credit card involves you putting down a deposit. This deposit then becomes the maximum that you can use the card for. For example, putting down a deposit of $500 on a secured credit card, means that you may spend no more than $500 on the card.
How does this help my credit?
Secured credit cards are similar to unsecured credit cards in that the credit companies make reports to the credit bureaus. If you use your secured credit card responsibly, the credit companies will make favorable reports.
Your path to financial wellness must include more than secured credit cards, but responsible use of secured credit cards is a good start.