As a bankruptcy attorney, I try to avoid seeing my clients’ problems through a single lens. Although many of them come to me in crisis, trying to manage their lives with overwhelming debt, I also try to get them to focus on the future and to think about how to re-establish their credit and improve their credit score once they’ve gone through bankruptcy.
One of the better ways to rebuild your credit after filing bankruptcy is to get a secured credit card. The way a secured credit card works is that, in return for making, for example, a $1,000 refundable deposit, you’ll be given a $1,000 line of credit. Should you default on payments to the credit card, your lender will take money from your deposit. The difference between a secured credit card and an unsecured credit card is that an unsecured credit card doesn’t require you to place a deposit. Also, unlike a debit card that a bank issues when you get a checking account, a secured credit card will be reported to the credit reporting bureaus.
The first step is to establish how much of a line of credit you want. Obviously, that will depend on how much of a deposit you can make. After that, you need to find a lender who provides a secured credit card.
Once you get the card, you need to follow a few rules in order to make sure the card can help you increase your credit score. First, use the card for small purchases for living expenses such as groceries or gas for your car. Avoid using the card to buy luxury items, such as electronics. Second, always make your payments on time. On time payments will be the biggest step you make in re-building your credit. Third, make more than the minimum payment.
By using a secured credit card after bankruptcy in a responsible manner, you’ll rebuild your credit score in a way that won’t jeopardize your financial situation. Avoid the temptation to take advantage of the many high interest credit card offers you’ll get after you file. Many people justify taking these offers to have a credit card “for an emergency”. The better course is to start an emergency savings fund to pay for unexpected expenses with cash.
If you have questions about how to rebuild your credit after you file bankruptcy, we hope you’ll come in for a free, no-obligation consultation with an experienced bankruptcy lawyer. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.