After bankruptcy, one of the first things to do to take full advantage of the fresh start you have is to begin rebuilding your credit as soon as possible. Within just a few months of your bankruptcy discharge, it’s time to start working on your credit. For most people, that starts with a secured credit card, then an unsecured one, and moves on from there. From there, it’s a matter of slow and steady. Along the way, there are some things you need to know about getting and keeping your credit score as high as it can be. Here are five ways to improve your credit score.
#1 Keep Balances Low or At Zero
If you’ve ever been in over your head with debt, you know it’s a terrible feeling. Not only that, but it’s a slippery slope. Paying off your credit cards in full each month is the best way to keep your credit cards from getting out of control. But it’s more than that. Balances determine utilization.
A big part of your credit score is utilization, which is the amount you’re using on your credit lines. If you use too much of your available credit, your credit score will drop, and you might not be offered future credit line increases. Creditors want to see that you use credit responsibly and pay promptly.
#2 Never Pay Late or Less Than You Should
You might think paying a credit card bill late now and then is no big deal. You might think it’s not such a hazard if you pay just one car loan payment or one mortgage payment late. In fact, it’s that first late payment that hits your credit score hard and causes it to drop.
Subsequent late payments will continue to erode your score, but it’s the first missed payment that takes the biggest toll, in most cases. You should also never pay less than the minimum due on a credit card or less than the installment owed on your car loan or mortgage loans.
#3 Don’t Close Old Accounts
Another aspect of your credit score is your average age of credit. It is calculated by totaling the years that your credit card accounts have been open divided by the number of credit cards. Suppose you have one card that’s six years old, two that are two years, and one that’s one year old.
That’s a total of eleven years of credit divided by five cards for an average age of 2.2 years. If your oldest card is a secured card and you decide to close it in favor of your newer accounts, you would drop to an average age of 1.25. That’s not nearly as good, and your score will drop just from closing it.
#4 Don’t Apply for Credit Haphazardly
You should not apply for credit unless you’re pretty certain that you will be approved. Many credit monitoring services will alert you when your score has improved enough to qualify for specific offers. By doing some research, you can make sure you meet the criteria.
For instance, some card issuers won’t work with bankruptcy filers until a certain amount of time has passed. Others won’t approve you if you’ve opened too many accounts recently. Only apply for credit when you meet the known criteria and don’t apply needlessly or often.
#5 Be Consistent with Credit Behavior
One of the things that creditors look for is consistent behavior. Suddenly running up your credit cards is a red flag that there’s a problem. Suddenly paying only the minimums is another warning sign. Missing a payment is an issue as well that can make a creditor think something is wrong.
Other warning signs that could cause a creditor to lower your credit line or refuse an increase is using your card for a cash advance or using your credit cards at places like pawn shops, gambling establishments, or other outlets that are a warning sign of risky behavior.
Once you start rebuilding your credit after bankruptcy, it’s important to stay on the right track. Re-establishing credit is a slow and steady process that requires diligence and patience. To find out more about rebuilding your credit score after bankruptcy, contact Credit Score Keys.
Call 919-495-2365 today for a free consultation with the credit experts at Credit Score Keys.