After bankruptcy, most lenders will not give you a traditional credit card right away. You must rebuild your credit and prove to lenders that they can trust you as a borrower. Secured credit cards can help you build your credit again.
Like traditional credit cards, secured credit cards help you build your credit score if you practice responsible habits.
What is a secured credit card?
Unlike a traditional credit card, the secured credit card requires you to make a deposit. Your deposit serves as the balance that you can borrow against. If you miss a payment or default on your credit card, the lender uses your deposit to pay the bill. Like traditional credit cards, unsecured cards may have similar benefits and rewards. Many will offer cash back or rewards on certain purchases.
How can you rebuild your credit with a secured credit card?
To build your credit, you need to practice good behavior. When you obtain a secured credit card, you should use it. However, only use it for purchases that you can afford. Pay it off in full as quickly as possible when you make a purchase. When you make payments, you begin to build your credit score. Additionally, make sure that your credit utilization ratio remains low. Your payment history and credit utilization ratio heavily impact your credit score.
Many lenders will allow you to transition from a secured credit card to an unsecured credit card. Once you rebuild your credit score and show good credit behavior, the lender may expand your balance or offer a traditional credit card.