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Rebuild your credit: Watch out for high interest credit cards

People who have declared bankruptcy in Illinois may be encouraged to open a new secured credit card with the idea of paying off the balance every month. Since bankruptcy can have a negative effect on your credit report for up to 10 years, rebuilding your credit is an essential part of reestablishing your financial stability.

Despite the positive affect a credit card can have on peoples’ credit score when they pay off any existing monthly balances, researchers warn about the dangers of having a subprime credit card. These credit cards are marketed to people who have low credit scores and give them a chance to reestablish their credit. In order to offset the risk that is taken by offering credit cards to people who have just declared bankruptcy, however, many of these credit card companies have high interest rates and charge exorbitant fees.

Some believe that these credit card agencies extend offers that are written in a way that makes it difficult for people to understand. Some debtors may not know what they are entering into when they sign up for an unsecured credit card, and many may end up paying hundreds of dollars in maintenance and processing fees.

Secured credit cards, on the other hand, usually extend the same credit-building potential but without the added fees and high interest rates. In some cases, these cards require people to come up with an initial deposit.

If you have filed for bankruptcy and are looking for a way to reestablish your financial presence and boost your credit score, a bankruptcy attorney may be helpful when it comes to exploring your options. 

Source: CBS News, “As subprime credit cards gain popularity, alarms ring,” Aimee Picchi, Aug. 23, 2016. 

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