How can you rebuild your credit score following bankruptcy?

A bankruptcy will affect your credit score, but there are things that you can do to re-establish good credit.

If credit card debt has mounted because of time off work or prescription co-pays you cannot afford, your income may only cover interest payments. When you may never be able to pay off a balance, Chapter 7 bankruptcy can help.

When credit cards were part of the reason for a filing, you may want to stay away from them after finalizing your bankruptcy. However, a secured credit card can help you rebuild your credit.

To open a secured credit card account, you pay a deposit to the bank that operates as security against default. The credit cards work the same way as traditional cards. You receive monthly bills and must pay interest on any balance you do not pay off. All payments that you make are reported to credit agencies. As you build a track record of timely payments, your credit score will improve.

Secured credit cards even have standard protection under the Fair Credit Billing Act. This means that you would not need to pay for something you ordered from Amazon if it did not arrive or if someone makes fraudulent charges on your account.

Once you have received a discharge of debts in bankruptcy, you would likely qualify for a secured credit card. One of the best secured credit cards, according to Credit.com, is the Harley Davidson Secured Visa issued by US Bank. You do need to recognize that these cards come with high interest rates. The US Bank card has an interest rate of 22.99 percent. On the plus side, the card does not have an annual fee.

Bankruptcy will affect your borrowing costs, but using a secured credit card will help you rebuild your credit faster.

Source: Credit.com, “The Best Secured Credit Cards in America,” Jason Steele, July 22, 2014.

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