Are you looking to secured credit cards to rebuild credit after bankruptcy? If so, you are definitely on the right track. Many people have been able to leverage this option to get on track to credit worthiness. By taking small baby steps, a $200 limit secured card can be part of a fresh new beginning to eventually qualifying for a normal mortgage in 2 years. How does it all work? We will explain it in the following paragraphs.
Re-establish Both Credit And New Spending Habits
If you have gotten into the bankruptcy situation partly as a result of card spending and still feel jitters from using one, a secured credit card could just be the perfect solution. Not only will it allow you to build your credit while you are using it, it also helps to naturally curb your spending and help you establish new credit management habits that will serve you over the long term.
How Secured Credit Cards Work
The card works this way: you will provide a security deposit to the issuer which sets the limit of your monthly card usage. For example, a $300 security deposit would mean that you can only spend up to the $300 limit a month. Should you fail to make a payment, that amount will be deducted from your security deposit.
Win-Win For The Bank And You
This makes it very low in risk to the issuing bank, as they know they have your deposit just in case they do not get paid. That makes it easy for them to give you a card despite the recent bankruptcy and allow you to get started on re-establishing your credit.
This arrangement is also good for anyone who may just be seeking to establish new spending patterns, as the limits of spending is clearly enforced, and backed up by a solid deposit. If you close the account in good standing, then the deposit will be returned to you.
Secured Credit Card Bank of America, Capital One, Wells Fargo, Orchard Bank etc
When you consider the low risk to an issuer, you can see why many banks will offer that you even though you are recovering from a bankruptcy. Some of the major banks like Bank of America, Capital One, Wells Fargo and Orchard bank will offer secured credit cards to rebuild credit after bankruptcy.
Start Small And Upgrade
The limits usually start off low like $200 - $300, but great news is that as you build more history with the card issuing company, they could upgrade your credit limits and eventually graduate your account to an unsecured credit card and return the full security deposit to you. For rebuilding your credit score, make sure that you submit monthly payments on time to keep your account in good standing.
Even though you have put down a security deposit, you should continue to make regular on-time payments. Don't wait on having the issuer use your security deposit to pay for any outstanding payments, as that may jeopardize your account history and credit score, not to mention late fees.
Extremely Important: Card Activity Must Be Reported To Major Credit Agencies
When choosing a secured credit cards to rebuild credit after bankruptcy, it is extremely important to find out if they will be reporting Do they report your account activity to the 3 main credit bureaus: Experian, Transunion and Equifax. The whole point of having this secured card is to help you build a good score. If your active and good activity and credit limits are not being reported, then the card will not help to build your credit score at all. This defeats your main purpose for having the card.
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