Debt Management Option to Re-establish Credit: Easy Debt Help Strategies for Rebuilding Credit After Bankruptcy

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Debt Management Option to Re-establish Credit: Easy Debt Help Strategies for Rebuilding Credit After Bankruptcy

May 21, 2017 steaming ahead 0

Rebuilding credit after bankruptcy can be a long and difficult process, but there is a debt management option to help consumers re-establish credit. Using a credit card to rebuild credit may sound difficult, but this strategy, using store cards and secured credit accounts, can go a long way towards reestablishing credit, even after bankruptcy.

Debt Help Important For Consumers

Many consumers are unaware of the debt management options that are available to consumers, and resign themselves to seven years of bad credit after filing for bankruptcy. Luckily, however, simple debt help strategies, such as easy-to-obtain credit cards and careful monitoring of a credit report, can help a consumer re-establish credit.

Rebuilding credit after bankruptcy, in particular, is necessary for future purchases. Consumers who have gone through the bankruptcy process will see an impact to their credit report for years to come, but it is still possible to improve the credit rating in the meantime. An improved credit score may allow a consumer to purchase a home, or get a credit card with a more desirable interest rate, both of which save the consumer money in the long-run.

Use a Credit Card to Rebuild Credit

Using a credit card to rebuild credit is a quick and easy strategy that consumers can use, even after filing for bankruptcy. There are two different types of credit card that virtually anyone can be approved for, regardless of credit score. The first type of credit card is known as a store credit card, such as a Sears card, or a Macy’s card. The second type is a secured credit card, typically issued by a bank.

Rebuild Credit with a Store Credit Card

Applying for a store credit card provides a quick avenue to a new credit account, which will show up on a credit report. It is critical, however, that consumers who use this option to re-establish credit always remain current on the account. In fact, when using a store credit card to rebuild credit, it is wise to leave the store credit card with a zero balance due to the extremely high interest rates charged by these cards.

Secured Credit Cards to Rebuild Credit

A secured credit card is issued through a bank or other lender, and can be very helpful in the process of rebuilding credit after bankruptcy. This type of card is secured by a cash deposit, held by the bank to be used in the event of the consumer’s inability to pay. It is extremely important that consumers verify certain pieces of information prior to signing up for a secured credit card.

  • Does the bank report the account to credit reporting agencies? Not all secured cards are reported to credit reporting agencies, such as Experian, TransUnion, and Equifax. A secured credit card that does not report to these agencies, or that reports clearly showing that the account is a secured account, will not benefit the consumer.
  • What are the fees associated with the card? Some secured credit cards charge monthly or annual fees, even when the balance on the card is a zero balance. If possible, consumers should apply for cards without excessive fees.
  • What are the exact situations in which the deposit may be used? If the deposit is used to pay the balance after one late payment, it may cause a problem for the consumer.