If you are considering bankruptcy, you may be concerned that you will be left with poor credit. Of course, after you file bankruptcy, it will appear on your credit report and certainly impact your credit score, but there are ways to rebuild your credit including secured credit cards.
A secured credit card is an option for people with either very little credit history and those with low credit scores who want to improve their credit worthiness. A borrower makes a refundable cash deposit – typically as low as $100 up to $1,000 – to secure the cards line of credit. The security deposit serves as collateral allowing card users to spend up to the limit they have deposited.
As cardholders make on-time monthly payments, the card issuer reports their progress to the big three credit bureaus, thereby establishing a pattern of responsible credit management that can drive credit scores up. In about two years’ time, a borrower can graduate to a traditional credit card with the same financial institution or another, and have the deposit on the secure credit card refunded.
Secured credit cards are a widely available tool for people just starting out in life and anyone who has hit a financial road bump and need to rebuild their credit. The drawbacks include having to come up with a deposit on a tight budget and keeping spending on the card to a minimum – no more than 30 percent of the limit of the card in order to score points with the bureaus. It goes without saying – no late payments.
Caveats include annual fees and higher interest rates. Annual fees vary depending on the issuer but could run up to $100 a year. The average APR on secured credit cards for borrowers with poor credit is roughly 25 percent, sometimes higher. It’s a good idea to hunt around for the best deal, being sure to read the small print, to decide if its a good strategy to restore your credit.
If you are in a difficult financial situation, it is important to seek help from an experienced Illinois credit repair attorney. Contact the Peoria bankruptcy law offices of Charles E. Covey for answers to your questions at 309-674-8125.