Rebuilding Credit After Personal Bankruptcy

Rebuilding Credit After Personal Bankruptcy
If you've been through personal bankruptcy, you're all too
familiar with the fact that your Beacon score is shot and
the need you have to try and rebuild credit as soon as
possible. The question is: What can you do ' and how long
will it take?

Even though you've swallowed your pride and filed for
personal bankruptcy protection, that does not mean that you
will never again qualify for credit. With that said, your
credit score is in the tank for the foreseeable future, and
the best way to bring your credit life back from the brink
of death is through the responsible use of credit cards.

First, there are two basic categories of credit cards that
you're going to want to explore. Each has its pros and
cons and I'll briefly explain both so you can decide which
option makes the most sense to you ' and your financial
goals.

Unsecured credit cards ' As the name implies, unsecured
credit cards don't provide any security to the issuer that
you will make your payments. As a result, many of these
cards have annual fees ranging from $39-$150 per year as
well as extremely high interest rates and fees.

In addition, they will frequently charge a monthly
participation fee ' and most also have substantial service
charges that many other cards do not. While your initial
line of credit may be in the range of $300-$500, your
available credit will be offset by the annual fee, set up
fees, and authorized user fees.

Secured credit cards ' On the other hand, secured credit
cards offer your lender a great deal more assurance that
you'll make good on your promise to pay, because you'll be
required to open a savings account with the card issuer to
guarantee that they'll be paid in the event that you
default.

Once the account is opened, your credit card account will
operate just like a standard credit card. The only
difference is that your security deposit acts as a kind of
security blanket for your lender.

A major benefit to having a secured credit card is that you
have the security of knowing for sure that your credit card
account will be paid off in the event that you run into
further financial difficulties.

Whatever you do, don't make the mistake of thinking that
you don't need to make monthly payments to your credit card
company because you have a savings deposit to guarantee
your account. This savings deposit will only be utilized
if you default on the card.

Your credit limit will normally be equal to your savings
deposit balance, so if you have $500 on deposit, that will
be your credit limit. If you want to increase your credit
limit, it's as simple as adding to the funds you have on
deposit.

As you demonstrate your ability to make timely payments,
your credit card company will periodically review your
credit report and may grant you occasional increases in
your credit line without requiring an additional deposit.

After a period of time, usually within a year or a year and
a half, they may even be willing to return your initial
deposit and convert your secured credit card account into
an unsecured one.

Deciding which card is best for you is a very personal
decision and can best be answered by a properly analyzing
your current financial situation.

If you lack the resources to fund a savings deposit and can
stomach the idea of paying higher ongoing fees to the
credit card company, an unsecured card might be a viable
option for you. However, if you don't trust yourself to be
responsible with credit you should opt for the secured card
' or not get a card at all.

The length of time it takes to fully resurrect your credit
will depend upon a variety of factors, including how bad
your credit was before you filed for bankruptcy, your
income, and what your debt to income ratio looks like.

You should be able to get the process started as soon as
your bankruptcy has been discharged and ' depending upon
your level of responsibility ' could be well on the path to
good credit within 6-12 months.

Personal bankruptcy was intended to help you claw your way
out of debt and rebuild credit, so be exceedingly careful
as you begin heading down the road towards resurrecting
your name, Beacon score, and financial reputation.

----------------------------------------------------
Darrin Roseborsky is a Refinance Specialist with OMAC
Mortgages, seminar speaker and president of the Roseborsky
Group and HomeRefinanceCoach.com. Darrin shows people how
to MAXIMIZE their equity PROPERLY and how to choose options
that make the MOST SENSE for their situation! An example of
exactly how this works, is at:
http://www.homerefinancecoach.com