How Do You Fix Your Credit After Bankruptcy?
Bankruptcy should not spell death for your personal credit. In fact, filing bankruptcy protection early is better than delaying it. Although your credit score will inevitably drop after bankruptcy declaration, there are several ways to recover from bad credit rating. You should ask yourself how do I fix my credit and also make sure you seek to find a valid plan how to achieve this goal. Follow these practical tips to improve your credit-worthiness and credit lines after bankruptcy.
The basic step in fixing your credit standing is to understand what factors are used by credit card companies when approving credit applications and setting interest rates. Your credit history is very important in the evaluation of any credit application, be it an application for credit card, mortgage, car loan or salary loan. Traditionally, FICO scores are taken into account. People with FICO scores of 700 and higher are usually considered credit-worthy. If your FICO score falls within this range, there is a higher chance that your bankrupt status will not prevent lenders from approving your credit application.
Knowing the financial consequences of filing bankruptcy is also important. A bankruptcy declaration is not something that you can easily drop from your credit history. It may take ten years for that to happen. Beware that your FICO score can remain below the safe threshold until you take some serious efforts to improve your credit score after bankruptcy.
Examining your credit report is the first concrete step in improving your credit store. Your credit card report can be obtained for free. Just send a request to Equifax, TransUnion and Experian via AnnualCreditReport.com. Look for errors that can be fixed to improve your credit-worthiness. There are several online credit standing assessment tools that you can use to understand financial jargon so you can assess the accuracy of your credit report.
Prioritize your recurring bills like rent, electricity bills and utility bills. Timeliness in settling your bills is a major consideration in loan evaluation. There is no way you can get another credit card if your bills for the past six months are unsettled. Even minor delays in bill payment can be an issue. You can subscribe to automatic bill payment services offered by your banks to ensure that your bills are paid on time. Remember that more than 30 percent of your credit score is determined by timeliness in settling your bills. Make it a habit to follow the due date of all your bills, and do not yield to the temptation of bypassing even one billing cycle. Cut your budget for less important expenses to make sure you have enough money to pay your bills when the due date comes.
Be extra careful when applying for post-bankruptcy credit card. If you do not have an outstanding credit card during bankruptcy, apply for one once your bankruptcy is discharged. Go for a secured card which involves a deposit. Then pay the bill in full on a monthly basis. Maintaining balances is not necessary as far as building good credit is concerned.
Be ready to accept higher interest rates and lower amount of loans after bankruptcy. You may need to wait for a year or two to get loans. Look for the best rates and do not limit your options to one or two lenders. Your ability to pay your first loan after bankruptcy has a major impact on the interest rates on the succeeding line of credit. If you fail to pay your first loan, your credit score will experience another setback. Try to avoid unpaid debt the second time around.
Do your homework when choosing credit score improvement services. Ask the past clients of these firms to make sure they are legitimate and professional. Although the fees can be high, these services can be worth your money if you have no time to figure out things on your own. However, any business involving credit cards is highly susceptible to fraud, so be sure you know the people to whom you will share your credit history and other personal data. Usually, these companies send an unsolicited offer, but do not grab it as if it is your last hope to restore your credit score. Ask yourself what these companies can do that you cannot accomplish on your own. More often than not, you can do most of the services they offer on your own.
Observe credit card limits. Your credit card limit will be low after bankruptcy, but it doesn't mean you shouldn't pay attention to due dates. No matter how much you spend, always try to pay your card issuer on time. Do not ask for the extension of your balance if you cannot pay more than you would spend.
Throwing away all your credit cards after bankruptcy can do more harm than good to your credit score. Fewer lines of credit means less ability to pay your expenses, which will inevitably put your credit score in riskier standing. Having a ready line of credit is better than having no credit at all. What you need is self-discipline so as to avoid overspending.