Improving your credit score is never more important than after you get a bankruptcy discharge. Just as healthy dietary and physical habits can keep your body in good shape, healthy financial habits can improve your credit score and allow you to make the most of your financial fresh start.Here are seven habits to help your credit score after bankruptcy…
Not applying for new credit can hurt your credit score, which won’t improve without activity. But applying for too much credit at once can tank your score since credit inquiries (i.e. a credit check) will temporarily lower it. These inquiries lose impact with time and gradually fall off your report, but you should still only apply for cards you’ve researched and have a good chance of receiving.
#1 Apply for Credit Cards Wisely
The average age of your credit accounts is important. Opening too many new accounts can drastically lower your age of credit, which will lower your score – even though you now have more available credit from more creditors. To avoid this, do your homework, research card qualifications and then apply for new credit at spaced-out intervals.
#2 Stagger out New Accounts
Because the age of your credit is so critical, closing older cards is also unwise. Post-bankruptcy, you’ll likely have to start rebuilding your credit with a secured credit card. You may be tempted to close this after a couple of years since you'll likely have “real” credit cards and because you want to get back the deposit you had to put down to get the secured card. But closing this account can hurt your credit score. Instead, leave it open – you can always close it later when your credit has more fully rebounded.
#3 Don’t Cancel Old Credit Cards
Your credit utilization is important, but you never want to carry a balance if you don’t have to. Instead, consider using your credit cards for monthly recurring bills like Netflix. You can also use cards for groceries and other necessities, then turn around and pay off the card balance immediately. You don’t even have to wait for the statement to cut – just pay online.
#4 Keep Balances at Low or Zero
If you’re coming out of bankruptcy, you hopefully don’t have any accounts left in collections. But if you do, or if you ever end up with an account in collections, paying it off is wise. Some credit score calculations don’t count collection accounts with a zero balance against you. This can be a way to bump your score instantly and get one more thing off your debt roster.
#5 Pay off Collection Accounts
When it comes to your bills, never pay anything late. It can be a slippery slope. With online bill pay options, there’s no excuse not to pay on time. Set up a schedule and remember to allow even electronic payments a few days to process. Stay on top of your bills, and if you can, set up a budget and stick to it. Late payments cause late fees and other negative consequences.
#6 Pay Often and Early
In order to keep improving, you need to know where your credit currently is. You also need to ensure that your efforts are paying off with a higher score. In addition, it's good to keep an eye out for errors, identity theft, and other issues that can crop up on your report. Enroll in a low-cost service that allows you to monitor all three of your credit reports, and check them on a monthly basis.
#7 Monitor Your Credit Score and Report
To find out more about improving your credit score after bankruptcy, contact Credit Score Keys today. Call today and be sure you make the most of the fresh start that bankruptcy offers.