After bankruptcy, you need to develop a plan.
Image Source: Stocksnap.io
When you’re ready to improve your credit score after bankruptcy, choose the best path to help you rebuild and improve your financial future. It takes time to get a better score, and the longer you take to get started, the longer until you see results. Check out this nine-step plan to get started improving your credit score today.
#1 Check Your Credit Report
Mistakes on your credit report can cost you points and result in a lower credit score. It’s particularly important after bankruptcy to check your report and make sure that all the accounts in your bankruptcy are reflected with a zero balance. Just getting errors fixed can provide a 20-point boost.
#2 Target Weak Areas
As you come out of bankruptcy, your weak areas will probably be obvious. However, if you have a mortgage or car loan that survived the bankruptcy, get a budget going ASAP so that you pay on time every month. From there, you need a plan to re-establish your credit and improve your credit score.
#3 Pay On Time
This is critical for bills and creditors that report to the credit bureaus, but you should try to never pay any bills late or short of what you owe. Bankruptcy is your shot at a financial reset, so you need to make the best of it by establishing or reinforcing good financial habits.
#4 Start ASAP Because Age Matters
One of the factors in your credit score is your average age of credit. The longer the better, so you need to get started soon after your bankruptcy discharge so that you start that clock ticking. As soon as you get your discharge, pull your credit reports, clean up any errors, and then start rebuilding credit.
#5 Get A Secured Credit Card
A secured card is usually the first card you can get after bankruptcy, so save money for this while you're waiting on your bankruptcy discharge. Keep in mind that you’ll need a cash deposit to open a secured card. You can be turned down for secured cards if you don’t meet criteria, so research each card before you apply.
#6 Don’t Apply Randomly
As you rebuild credit, it should be done strategically. Start with secured cards before moving onto unsecured cards, and only apply for credit you're pretty sure you can get. This means doing your homework to figure out what cards make sense for your situation. Don’t respond to random offers in the mail.
#7 Use But Don’t Abuse
Using your credit cards (secured or unsecured) responsibly can help score credit line increases that improve the utilization factor of your credit score. Using cards and then paying them off in full each month can is useful, but you should never spend mindlessly. Using your cards for fuel or groceries is practical, but avoid frivolous purchases as much as possible.
#8 Understand Your Credit Score
Some actions you think might help your score could actually hurt it. Understand that your score is a combination of your payment history (on-time is a must), credit utilization (how much of your credit lines you’re using), average age of credit (older accounts help a lot), mix of credit, and inquiries (you don’t want a big stack of these showing).
#9 Make The Most Of Your Financial Fresh Start
Most bankruptcy filers only file bankruptcy once in their lifetime because this fresh start is enough to get and keep them on track. By following a plan of intentional action to improve your credit score after bankruptcy, you’ll make the most of the financial reset offered by North Carolina bankruptcy.
To find out more about improving your credit score after bankruptcy, contact Credit Score Keys today. We can help.