After filing bankruptcy, your credit score is affected. You will most likely not be able to apply for traditional, unsecured credit cards soon after bankruptcy proceedings. Your bankruptcy will remain on your credit score and can also impact the decisions of lenders.
A secured card is something you might consider before you apply for an unsecured credit card. U.S. News states that a secured card requires a deposit.
How to Use a Secured Credit Card
A secured card is a card that looks like an unsecured credit card when it’s approved by a lender. It is impossible to distinguish between an unsecured and secured card just by their appearance. A deposit is required when applying for a secured credit card. The financial institution retains the security deposit. The lender can lend you up to the amount of the deposit. If you fail to make your payments, the lender will use your deposit to pay your bill.
A Secured Card Can Help You Build Your Credit
Secured credit cards can help build credit, as the lender will still report your payment history to the credit bureaus. Your credit score will rise if you pay the card on time and keep your balance low.
Also, a secured credit card will help you build credit and make it easier to use credit responsibly. It will also reduce the chance of getting into debt.
Many secured credit cards permit you to switch to a regular card later. A secured card can help you rebuild what you have lost after bankruptcy.
This post was written by Trey Wright, a Jacksonville chapter 11 lawyer with extensive experience! Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, which specializes in areas related to bankruptcy law, estate planning, and business litigation.
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