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Secured products can help you rebuild your credit post-bankruptcy

One of the reasons that many people hesitate to file for bankruptcy is that they assume they won't be able to get credit again for a very long time. A bankruptcy will stay on your credit reports for a decade. This will impact your ability to qualify for credit cards, loans and other credit products. However, you can still begin to rebuild your credit immediately.

Lenders want to see that applicants can handle their credit obligations. Two credit products that are designed for people working to re-establish good credit after bankruptcy are secured credit cards and secured loans.

Secured credit card: With these cards, you make a deposit and can charge purchases on the card for up to that deposit amount. There are a few things to watch out for when shopping for a secured card.

Read the requirements to be as certain as possible that you'll qualify. If you apply for a card and get rejected, that counts as an inquiry on your credit report and can cause your score to drop, albeit temporarily. That small decrease is worth it to obtain a card. You just don't want multiple inquiries to get one card.

It's also important to look at the fees and interest rates associated with each card you're considering. These vary, but can be high.

Secured loan: These are generally available from community banks and credit unions. There are two types. One kind is like the secured credit card in that you deposit money and then borrow against it. With the other kind, the creditor lends you the money, which it puts in a savings account. As you make payments, that money is then released to you. The financial institution reports your payment record to credit bureaus to show that you've established a habit of making regular payments.

It may seem like these two products have little practical value. However, they get people into the habit of only spending what they have and making a budget they can stick to. These are essential habits as you eventually move on to getting unsecured credit again.

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Lakewood, CO 80228

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