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  Dear
Dr. Don,
I recently filed for Chapter 7 bankruptcy. It
was discharged in September 2004. I maintained my auto loan and
have continued an excellent payment record with them (two years
straight).
My question is, what should be my next step in rebuilding
my credit? Should I look to get a secured credit card with a bank?
I've read that this was the best place to start because I'd be using
my own funds and then can possibly be upgraded to an unsecured card
as I demonstrate my ability to pay with a proven track record. Please
point me in the right direction. Thanks.
-- HD Buildup
 Dear
HD,
Your solid payment record on the car loan will help a lot in allowing
you to rebuild your credit history. A secured credit card is backed
by money held on deposit with the credit card provider. Typically
the credit limit on the card matches the amount on deposit, so the
firm isn't taking on any real risk in issuing you the card. Bankrate's
credit card search lets you shop among secured card providers.
Your deposit options include a savings account, money
market or certificate of deposit. Generally the interest rate you'll
earn on your deposit is what you'd get by opening a savings account
at your own bank, but not always.
Your bankruptcy filing, even though it has been discharged,
will reduce the number of providers willing to issue you a secured
credit card. Call and talk to a representative before filling out
an application and ask what their policy is concerning bankruptcy.
The last thing you want right now is a list of denied
secured credit card applications showing up on your credit report.
While you're talking to the rep, ask where they report your credit
history. You'd prefer a card that reports to the three principal
credit bureaus: Equifax, Experian and TransUnion.
Plan on paying off the balances each month because
the interest rates on secured cards are high, look for low annual
fees and avoid cards with high processing or application fees. There
are firms that try to take advantage of people looking to rebuild
their credit.
According to conventional wisdom, it takes about two
years with a blemish-free payment history before creditors are willing
to consider extending you credit. Your secured card provider knows
that's your goal and may extend an offer to switch your account
to an unsecured card after you've established a payment history.
Otherwise, wait about a year before you start shopping
for an unsecured card. Use Bankrate's search feature again, only
this time for an unsecured card that meets your needs. Don't apply
all over the place for credit. Pick one or two card providers that
meet your needs and apply to them, but call the company before applying
and ask their policy concerning issuing cards to people who have
declared bankruptcy.
Every application shows up on your credit report and
multiple applications make you look desperate for credit. Lenders
hate lending to desperate people. If you're denied then wait another
six months before trying again. Bankrate's "Baby-step
your way to credit with a secured credit card" has more
information.
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