5 ways to rebuild your credit score
Image Source: Flickr CC User Joanna Poe
If you filed bankruptcy to get yourself out of disastrous debt, you can feel good about your clean slate. However, rebuilding your credit should be one of your top priorities after you get your bankruptcy discharge. Here’s a look at five ways to get your FICO score back on track after bankruptcy.
A few months after your bankruptcy discharge, you should pull all three of your credit reports (Experian, TransUnion and Equifax). Go through them line by line to make sure that any accounts included in your bankruptcy reflect a zero balance and are notated.
#1 Clean Your Credit Report of Errors
You will likely find some errors – few people’s credit reports are 100% accurate. Clean up any inaccuracies so that you can go forward with an accurate record. Even if it’s a hassle to correct errors, stick with it because this is an important first step.
Once you start getting credit, such as credit cards (secured first, then unsecured), you need to use it to get more credit and continually rebuild your FICO score. Some people are gun-shy about credit after bankruptcy, but the only way to recover is to use it wisely.
#2 Get Credit, Then Use It
When you get a credit card, you need to use it, but not overuse it. You can use it for a recurring charge like Netflix, or for gas, then pay it off in full. If you pay your card balances prior to your statement date (to keep credit utilization low), you won't pay interest.
The top habit to get into after bankruptcy is to NEVER, EVER pay any bills late. It’s a bad habit and a slippery slope. This rule goes for utilities like electric, which don’t report to credit agencies, and for your car loan and credit card bills, which do report.
#3 Never Pay Any Bills Late – and Pay Credit Cards Early
For any debts not included in your bankruptcy (mortgage, student loan, auto loan, taxes), make sure you continue paying on time and make arrangements to clear out any late balances that weren’t corrected as part of the bankruptcy. Get on top of your bills and stay that way.
It takes time to improve your credit score, but you can start rebuilding right away. Cleaning up your credit reports and paying bills are the first steps. Then you'll want to save money to put down a deposit for a secured credit card, the first type of card you can get.
#4 Add More Credit to Your Roster Gradually
From there, look for unsecured credit cards that accept lower credit scores and apply for them gradually. Too many credit inquiries will tank your score and make it harder to get cards. (But fortunately, the older an inquiry is, the less impact it has on your credit score.)
The average age of your credit is another factor that helps determine your credit score. That’s why opening a secured credit card account as soon as possible will help this part of your score. Every time you open a new account, your average age of credit drops.
#5 Don’t Close Accounts, Ever
This also means closing out older accounts is a bad idea. Your secured credit card may become less important once you have “real” credit cards, but closing it can cause your score to drop because it will take an older account out of the equation.
One of the best ways to take full advantage of the fresh start that bankruptcy offers is to begin rebuilding your credit as soon as possible. To find out more, contact Credit Score Keys today for help improving your credit score after bankruptcy.