When going through bankruptcy or after you file, your credit score will suffer a blow. Fortunately, there are ways that you can bounce back from bankruptcy with a better credit score than ever. One way that many people build their credit is through the use of a secured credit card.
Nerdwallet describes a secured credit card as a credit card upheld by a cash deposit.
How does a secured credit card work?
Secured credit cards are easier to obtain than unsecured cards. Unsecured cards pose a higher risk to lenders. However, when you apply for a secured card, you have to make a deposit. The deposit is the amount that you can borrow against. If you do not pay your bill, then your creditor can take the money from the deposit. If you always pay your bills, however, then you eventually qualify for an unsecured card. When you make the switch, you receive your initial deposit.
How can you build your credit?
After receiving a secured credit card, you may wonder what you should do next. To rebuild your credit, you need to practice care when you use the card. Try to use it sparingly. Make small purchases every month that you know you have the funds for. Never make a purchase that you cannot pay off. Before your due date, pay your credit card off every month. When you pay off the card, you do not have to worry about interest.
After a year, you should begin to see a big difference in your credit score. Many people can apply for a standard credit card or unsecured card within a year of using the secured card.