January 19, 2023
If you became so overwhelmed with debt that you declared bankruptcy, you’re certainly not alone. According to the United States Courts, approximately 384,000 bankruptcy cases were filed in federal courts in 2022. Although that number has significantly decreased from the almost 800,000 cases in 2016, declaring bankruptcy is something nobody ever wants to consider.
Declaring bankruptcy is a huge decision with many serious consequences. Unfortunately, it may be your only path out of debt.
Rebuilding your credit
When you declare bankruptcy, your credit score and report can be ruined, and it will remain on your credit report for seven to 10 years. However, that doesn’t mean you’re stuck with bad credit for a decade. You can start rebuilding your credit right away.
Below are three tips that can help you get back on track.
1. Address the root problem
Declaring bankruptcy is a big deal. But if you don’t change your spending habits or lifestyle, you could end up drowning in debt again.
It’s important to address the root causes of your spending. For example, if you compulsively shop or shop to handle stress, going to therapy and curbing your spending can help.
Going forward, create a budget and stick to it to avoid ending up in debt again.
2. Pay your bills
According to FICO — the organization behind your credit score — whether or not you make all of your payments on time is the biggest factor that determines your score. If you miss a credit card or utility payment, your credit can be dinged even further.
Make paying all of your bills on time a priority. It can be helpful to mark due dates on a physical calendar, set up alerts on your phone, or even download an app to track your bills. By keeping up with payments, you can start rebuilding your credit a month at a time.
3. Add credit
Next, it’s important to start building a fresh credit history by gradually adding in forms of credit. By adding a credit card to your name, you can show creditors that you are reliable by making your payments and using the card thoughtfully.
While opening a new credit card can give your credit a boost, only take this step once you’ve addressed the root cause of your spending issues and have a budget in place to prevent racking up debt again.
Finding a credit card
Because your credit is likely in poor shape, your best option to start rebuilding your credit is a secured credit card.
Secured cards work differently than traditional cards. Rather than a credit line the company extends to you, you have to make a security deposit on the card. That security deposit is how much you can charge on the card.
For example, if you put down a $500 security deposit, you’d have a spending limit of $500. Once you charged $500 to the card, you can’t use it again until you make a payment.
Secured credit cards are like credit cards with training wheels. They give you the convenience of credit, but limit how much you can charge so you can’t end up thousands in debt.
Here are three secured credit cards to consider:
Capital One® Secured Mastercard®: With this card, Capital One reports all of your activity to the three major credit bureaus: Equifax, Experian, and TransUnion. That reporting can help build up your credit history. Plus, you could qualify for a larger credit line than you deposit over time.
PREMIER Bankcard® Secured Credit Card: You don’t need any credit history for this card, and First PREMIER® Bank will report your activity to the credit bureaus.
Applied Bank® Secured Visa® Gold Preferred® Credit Card: This is A REAL Visa Credit Card with automatic reporting to All three national credit bureaus. It has a low fixed interest rate of 9.99% no application fee and no penalty rate. The Applied Bank® Secured Visa® Gold Preferred® Credit Card also has a refundable security deposit and access to online & mobile banking.
Applying for a secured credit card is an important first step in rebuilding your credit. Make all of your payments on time, watch your spending, and stick to a budget, and you can establish a solid credit history. Over time, your credit will improve, and you can apply for other credit cards or personal loans to help boost your score even more.
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles. The information is accurate to the best of our knowledge when posted; however, all credit card information is presented without warranty. Please check the issuer’s website for the most current information.