So life threw you a curveball and you had to declare bankruptcy. Now you want to start building your credit again, but you discover that it’s harder than you anticipated. The biggest problem is that it’s difficult to build credit when you have no credit.

The easiest way is to get a credit card, but many banks will turn you down, and the ones that do offer you a credit card attach all sorts of fees to it: annual fee, registration fee, application fee… before you know it you’ve paid over $200 in fees! Now that’s insane!

Don’t fear, Fiscal Sanity is here!

Here’s the sane way to build your credit, without feeling like you’re being taken advantage of:

Secured Credit Cards:

This type of credit card is designed to give you credit, without the bank taking on risk. You deposit money at the bank, let’s say $200, and the bank gives you a $200 credit limit on your credit card. If you don’t pay your monthly bills, the bank has your money as collateral. It can take up to three years before you’re “credit worthy”, but once you are, and you qualify for a non-secured card, you can close your account at the bank and get your money back.

Secured cards can be tricky and you need to do your homework before applying for them. Some of them treat you fairly and some of them will hit you with insane fees like we mentioned above.

Currently, we can only recommend the Orchard Bank secured credit card, which is provided by HSBC. They treat you like a customer should be treated, and their fees are reasonable.

For more information check out our article: Secured Credit Cards: 101

Personal Loans:

How can a personal loan help my credit, you may ask? Well, if your friends or family hand you $1,000 and you hand them an IOU, then it won’t.

But if your friends or family loan you money through Prosper.com, then you WILL build credit.

Prosper.com is a marketplace for credit that enables people to lend money to other people in a safe, efficient manner. You create an account with Prosper, type in how much you want to borrow, and then have people bid on loaning you money. You can even invite your friends and family to bid on your loan.

So, if you borrow $5,000, you may end up having 100 different people loaning you $50 each. Prosper handles all the bookkeeping, so you’re only paying back one loan, and Prosper divides it up amongst your lenders.

You can use prosper to borrow money you may actually need, but if you’re doing it to build credit we recommend that you keep your borrowed amount low. $1,000 should do the trick.

To make it easy to get started, we set up a Fiscal Sanity group on Prosper. Just click here to join!