You may have experienced difficulty paying your bills on time due to circumstances that overwhelmed your finances. Receive guidance by clicking here for Tropical Financial Credit Union’s online tools for financial fitness. Sometimes, your situation is so challenging that the problems cannot be overcome.
Your credit score will take a big hit in the process. If you filed for personal bankruptcy, that mark will stay on your credit report for 10 years from the court order or adjudication date. A credit card or loan default can remain on your record for seven years. And a scheduled debt payment that’s 90 days or more late will also damage your credit score.
Financial institutions will issue cards to people with poor credit scores when a deposit secures the credit line. If you do not pay your bill, the payment will be deducted from the money on deposit. The card issuer has almost no default exposure because the credit line is no higher than the deposit amount.
Benefits of a secured credit card
A secured credit card can improve your credit score. Over time, you can become eligible for loans at lower rates, become eligible for car and other loans, qualify for a mortgage, and more.
How do you rebuild your credit history?
Depending on how low your credit score fell, it can take years to rise from poor to fair to good. In numerical terms, that can be from the bottom score of 300 into the 670-739 range.
As you move up the ladder, good things can happen. The card issuer may return the deposit, turning your secured card into an unsecured one. You may start to receive card offers with better terms. You may also find that the rates on car and home loans are comparatively lower. That can make those purchases more affordable or create opportunities to refinance at a better rate.
What can you expect when applying for a secured credit card?
With a secured card, expect a higher rate than an unsecured card issued to someone with stellar credit, a lower credit line, few to no benefits such as airline miles or cash rebates, and an annual fee.