Rebuilding your credit is a key goal in the aftermath of any kind of bankruptcy. Particularly if you struggled with credit card debt prior to bankruptcy, it might surprise you to learn that credit cards can help you rebuild your credit.
Secured credit cards are a cornerstone of any solid credit rebuilding plan. According to NerdWallet, secured credit cards act very similarly to unsecured credit cards, other than there is a deposit on a secured credit card.
How does it work?
For a secured credit card, you must put down a deposit for the card to work. The deposit you put down then becomes the maximum limit of the credit card. So if you put down $500 on your secured credit card, the maximum limit of the credit card is then $500.
How does this help rebuild credit?
Unsecured credit cards report to the 3 major credit bureaus. Secured credit cards report to the credit bureaus as well. This is what differentiates a secured credit card from a Visa gift card. Whereas a Visa gift card acts more like a debit card, a secured credit card is an actual credit card. The sole difference is that there is a deposit that the company will take if you fail to pay your credit card bills.
Getting a secured credit card and using it responsibly will help to repair your damaged credit. Secured credit cards are also good practice for learning how to use credit responsibly. Once you are able to graduate to an unsecured credit card, you may have much better spending habits.