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Secured Credit Cards--Path to a Great Credit Score

Something I am often asked is, "How will bankruptcy effect my credit score?".  The answer is not always straight forward.  For some, bankruptcy will have a short-term negative impact.  This is when the person has struggled to make minimum payments on serveral cards or has not yet gone past due.  At that time, their current credit rating has not been effected by late payments, etc.  For others, bankruptcy can actually increase their score.  This is because of the resulting improvement to their debt-to-income ratio and illimination of negative payment history.  

There are serveral ways you can begin rebuildining after a bankruptcy filing.  One great way is to utilize what's called a "secured" credit card.  This does not necessarily mean that it is a secured debt like your car or house note.  Rather, it is secured by a deposit you give the bank.  The way it works is simple.  The account holder deposits with the bank an amount of money equal to the credit limit on the account.  Most of the time the minimum is somewhere close to $200.00.  The bank then issues you a credit card "secured" by the deposit amount.  You now have a credit card with a $200.00 credit limit.  I know this doesn't sound like a lot of money, and it isn't, but that isn't the point.  The advantage of this is that the day after your bankruptcy filing, you can open a new credit account, which will be listed to the credit reporting agencies.  Using this card and paying the account off each month will build positive credit history after the bankruptcy.  Usually, after about 12 months of positive payment history you can apply to the bank for a return of your deposit and issuance of an unsecured account.  Many are willing to do so based on your new history with their company.  

The path to your new financial future takes many steps.  Using a secured credit card to rebuild positive payment history is just one of the many steps.  I have attached a link to a website that allows you to compare the different secured credit card options.

If you have any questions about debt relief and want to know your options, feel free to give our office a call.  We are here to listen, and here to help.