It is a sad reality that many youngsters were forced to declare bankruptcy while they’re in still in school or immediately after they graduated from college. Some people blame it on credit cards and others blame it on the credit card holders. True, poor credit card use can lead one into uncontrolled debt and in a worst case one can end up filing for bankruptcy.
If this happened to you, what can you do? If you had to file for bankruptcy as a student, does this mean that your personal credit is damaged permanently? The good news is that there is hope for recovery. As soon as you’re discharged from bankruptcy, you can take positive steps towards rebuilding your personal credit and reputation.
Secured Credit Cards for Students
Bankruptcy erases all the past credit history that you tried to build for yourself. Hence, the only way you can recover or rebuild your lost credit is by opening new accounts. As someone who has gone through bankruptcy, you may think that no creditor or lender would be willing to extend credit for you again. But you’ll be glad to know that most finance companies are willing to open their doors even for customers with a record of bankruptcy.
One of the easiest ways to start rebuilding your damaged credit is to apply for a secured credit card. Secured credit cards are used much like regular credit cards, except for a few differences. One is that you will not be required to show good or excellent credit rating to be approved. This particular card is offered for people with poor credit history or no credit history at all.
A secured credit card also requires the submission of cash deposit in the cardholder’s account. This fund is also called a “security deposit” because it gives the credit card issuer the assurance that there is existing cash available should the cardholder default from his/her debt repayment. Security deposits range from $300 to $1,000 and above, depending on the issuer. Typically, your credit limit would be equivalent to the value of your security deposit. Therefore, if you wish to enjoy a higher credit line, then be prepared to submit a higher security deposit as well.
As expected, secured credit cards usually have higher interest rates and fees than regular credit cards. Needless to say there will be also be more restrictions for a secured card holder such as a lower credit line and the absence of reward opportunities. However, keep in mind that a secured credit card is only a tool for rebuilding bad credit. If you use it correctly, then you should be able to get an upgrade to a non-secured credit card account.
Take note that not all “secured cards” in the market provide credit reporting to the major credit bureaus. It’s very important to ensure that your issuer will be reporting your payments to the major credit bureaus regularly since this is the only way you can update your credit history. After at least a year of consistent payment, you should be able to improve your credit history and be eligible for opening other accounts with other lenders, insurers and credit companies.
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