This is a guest post by the experts at Ratehub.ca
Bankruptcy is a scary thing. It was likely one of the most stressful times of your life, but once you’ve officially received your discharge it’s time to get on with your life. You’ll likely want to start rebuilding your credit score but, understandably, it may take some time before you’re in good standing.
It’s important to stay patient during this time since both Equifax and TransUnion, Canada’s two credit bureaus, will keep a record of your bankruptcy on your credit report for seven years. Fortunately, it won’t take that long to build your credit score as long as you stick to the following steps:
Get Your Affairs in Order
If you had to declare bankruptcy, debt was obviously a factor. To ensure you don’t fall back into debt, you’ll want to build up an emergency fund. Traditionally, emergency funds are meant for emergencies such as a job loss. If you start going into debt again, go ahead and dip into your emergency fund to keep you in the black.
Obviously, you want to avoid a cycle of debt so maybe it makes sense to be cautious of your credit card spending at this time. It might be a good idea to strictly use a joint card where you’re the supplementary user. This way, there will be someone to help monitor your spending. Keep in mind that the primary cardholder is responsible for any debts that you incur, so there should be absolute trust for this to work out.
Get to Know Credit Better
Some people avoid credit cards after being discharged from bankruptcy since that’s the reason they went into debt in the first place. However, you’ll need to start using credit again if you want your credit score to increase.
To help you get over your fear of credit, it may be worth your time to investigate some of the best credit cards in Canada and how they work. Read up on interest rates and how much you’ll be paying if you don’t pay your full balance every month. You’ll also want to look into any additional fees you might have to pay such as the annual fee. Ideally you want to prepare yourself and how you manage your money so you can avoid going into debt again.
Get a Secured Credit Card
The easiest way to start rebuilding your credit score is to apply for one of the best secured credit cards. These types of credit cards are similar to prepaid credit cards, but the major difference is that your spending gets reported to credit bureaus. Here are three of the most popular secured credit cards:
Home Trust Secured Visa—Home Trust may not be a brand you recognize, but the Home Trust Secured Visa allows you to put down as little as $500 or as much as $10,000. The nice thing about this card is that you can apply any time after being discharged from bankruptcy.
Home Trust Secured Annual Fee Visa—As the name implies, the Home Trust Secured Annual Fee Visa comes with an annual fee of $59. What you get for that fee is a lower interest rate of 14.9%. This is advantageous if you tend to carry a balance, but obviously, it’s always best to pay off your full balance every month.
Capital One Guaranteed Secured MasterCard—You guessed it, applicants of the Capital One Guaranteed Secured MasterCard are guaranteed to be approved. Unlike the Home Trust cards, this card does require a $75 to $300 security deposit which is returned after you’ve closed your account and paid off you remaining balance. There is an annual fee of $59 with this card.
The bottom line
Whenever you’re dealing with credit cards after bankruptcy, the key is to not relapse. Take things slow if you have to and read up on management. Your bankruptcy was in the past, it’s time to move forward.
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