Whether or not a person can bounce back from bankruptcy is a worry that most people have before and after filing bankruptcy. While it is true that bankruptcy affects your credit score, it is not a permanent mark against your credit.
After discharging your debt, you have an opportunity to rebuild your financial health. Secured credit cards are one of the best tools for building credit.
Secured credit cards explained
CNBC describes a secured credit card as similar to an unsecured card, except that you have to make a security deposit. The security deposit is your credit limit. Most cards start with a $200 limit, but some may allow you to deposit over $2,000.
Think of the security deposit as your collateral. If you default on your card payment, the bank has access to your deposit. Your deposit is refundable too. If you close the account or choose to upgrade to an unsecured card later, you can have your deposit back.
Secured credit cards and credit building
After you make a security deposit, you can make purchases just like you would with a traditional credit card. If you make your payments on time, some secured cards will increase your balance without asking for an additional deposit. Other cards may ask you for a deposit when you want to increase your spending limit. Like other credit cards, you still incur interest. Every payment that you make benefits your credit score. Most secured credit cards report to the main credit bureaus, hence every time you keep up with your payments, you build your credit.
