Once you have completed all of your bankruptcy duties you will be discharged or relieved from your debts and can start to rebuild your credit. As you rebuild, your credit score will improve and that fresh start that you were seeking can begin.
During a bankruptcy your credit rating is an R9. This means that it is a “bad debt” and is written off. However, once you are discharged from your bankruptcy, your credit report will be updated to show your discharge, ultimately clearing your debts. Your credit rating will go from an R9 to an R0 and you can start to restructure your credit.
Secured Credit Cards: One Option For Rebuilding Credit
A secured credit card is one option for rebuilding your credit. You do not have to wait until you are discharged from bankruptcy to apply for a secured credit card; you can kick-start the process before you have completed your bankruptcy. Once you get the secured credit card it is important to use it every month for at least one small purchase and pay it off right away. Obtaining and using a secured credit card shows your lenders that you can use the card regularly and pay it off on time. Options such as this will get you to an R1 rating and will improve your credit score.
What is a secured credit card?
A secured credit card typically has a spending limit of either $500 or $1,000. The limit depends on the security deposit amount that you provide to the financial institution. For example, a $500 limit usually has a $500 security deposit. The financial institution holds the deposit as security in case you do not make your payments. They do not use the deposit towards purchases, you need to pay for that. In time, they will likely release the security deposit back to you, once they have confidence in your ability to pay the charges on time.
Secured credit cards and other credit rebuilding options are discussed in the two mandatory counseling sessions as part of your bankruptcy duties. For more information about the bankruptcy process and how it can help you to get your fresh start, contact an experienced trustee in bankruptcy to schedule a free consultation.