Going through a chapter 7 bankruptcy can be stressful, but it is also ultimately freeing. Having the yoke of debt removed from you gives you the chance to start a new life. In fact, one of the first things that people wish to do once they finish the bankruptcy process is start rebuilding their credit.
It is possible that credit cards originally led you to bankruptcy. It may surprise you that credit cards can actually help you rebuild your credit, as well. According to NerdWallet, secured credit cards offer a safe and reliable means of rebuilding credit after a bankruptcy.
What makes secured credit cards different?
When somebody says the phrase “credit card,” it is likely that you first think of an unsecured credit card. Unsecured credit cards are the most common, and involve being able to use a credit card up until you hit the maximum limit. For unsecured credit cards, there is no collateral at all attached to the credit.
Secured credit cards require you to put down a deposit in order to get a maximum limit. So, if you put down $200 as collateral on your secured credit card, your maximum is $200. Secured credit cards function the same way that unsecured credit cards do, with the exception that if you fail to pay your credit card bill the company takes the collateral.
How does this help rebuild credit?
Secured credit cards report to the major credit bureaus the same way that unsecured credit cards do. Responsible use of a secured credit card will improve your credit ranking. Usually, with responsible use of a secured credit card, individuals find that they can qualify for an unsecured credit card after a year.