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| Rebuilding Credit After Bankruptcy |
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One of the best ways to start rebuilding credit after bankruptcy is to obtain
what is known as a secured credit card. A secured card is a bank credit card
backed by money that you deposit and keep in a bank account that is linked to
the credit card company. That account serves as security for the card.
(If you don't pay your credit card bill, the money in your account may be
used to cover that debt. On the other hand, you may increase your "limit" by
increasing the balance in your linked bank account.) Secured credit card
grantors report to the credit bureaus just like the unsecured do, so your
new-found positive payment history will be known by future creditors.
Although the interest rates may be higher for these cards than for non-secured
cards, they are worth the extra cost; you are showing that you can be trusted to
"buy now-pay later" once more. And, as you build your good payment history
with a secured card, the company may reduce the amount you must keep in your
linked bank account or eliminate it altogether, thus giving you the kind of
unsecured card you'd have little chance of getting otherwise.
Another good way to re-establish credit after a bankruptcy is to ask another
person who trusts you to cosign a small loan for you; maybe just a personal
loan at the bank where you have your checking and (hopefully!) savings accounts.
As you make payments on the cosigned loan, the positive credit history you are
building will be reported on your credit profile just like a loan you took out
by yourself would. Just to be sure you and your cosigning partner understand
what cosigning involves, you might both read this article on cosigning:
www.creditmatters.com/articles/011099_119.asp
After you have spent a period of time charging and paying, borrowing and
paying; you will be ready to adopt the methods, that people who have never
declared bankruptcy would use to build good credit. Helpful information on
establishing credit can be found in the Credit Basics area of our web site at
www.creditmatters.com/channels/buildcdt.asp.
Copyright © 2000, CreditMatters.com
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