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Consider secure cards after a bankruptcy

After you come out of a divorce, bankruptcy or other traumatic financial event, you may find yourself wondering how to rebuild your personal credit score. A good credit score can provide you with access to home and car loans, student loans, and other important lines of credit that can allow you to purchase much-needed items. After you have gone through a debt-relief program, your credit score may need some rejuvenation. Experts say one of the best ways to pump up your credit score is to utilize secured lines of credit.

Secured credit cards require a collateral deposit to ensure your payment. Unlike prepaid debit cards, secured credit card information is reported to all major credit bureaus, which means that it will directly impact your credit score.

First, analyze your budget before you jump into an agreement with a secured card firm. Most require a refundable deposit to establish your credit line. Those deposits can range in price from a couple hundred dollars to more than $5,000, according to financial gurus. Examine your budget to determine how much you can afford to spend on such a deposit. If you have a poor credit score because of years of defaults, you might consider investing in a higher-limit card.

Just like with any purchase, you are going to want to comparison shop for your secured credit card. Consider talking to credit unions in addition to traditional banks. Credit unions often offer low-interest secured cards that are perfect for those seeking to rebuild.

Furthermore, make sure that you never miss a payment and make more than the minimum payment. You can pay off all current debts as quickly as possible. A secured line of credit cannot boost your credit score without help from other arenas. If you are toting a serious amount of debt from other sources, the secured card is unlikely to make a significant difference.

By keeping track of payments and making sure to pay off as much as possible each month, you are establishing a responsible pattern of behavior that will make you more desirable for unsecured cards in the future.

Source: US News, "How to rebuild credit with secured cards," Wise Bread, Dec. 3, 2012.

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