The New Year is an opportunity to start things fresh. It is a time when you make resolutions and goals for the coming year. Some people make overwhelming goals to revamp their lives from top to bottom and some shoot for smaller targets. Close to 70% of people in a recent survey said they are making a resolution for 2018. The top resolutions are diet, exercise, and dealing with finances. If you are just coming out of a bankruptcy, it’s a great time to resolve to improve your credit score.
When you file for bankruptcy, your credit score will take a hit, but if your finances are so dire that you need the relief offered by bankruptcy, your score is probably already on a downward trend. Rebuilding your credit score after bankruptcy is essential to getting better prices on car insurance, to buying a home or vehicle, or to being approved for rental property or a job you want. Check out the following tips to help rebuild your credit in 2018.
Know your credit score
Knowing your credit score (good or bad) is the first thing you should do after you get your bankruptcy discharge. You might feel that since your credit score has taken a hit, there’s no need to check on it or you might not want to see it because you’re worried it will be bad news. But not knowing is worse. To know where you’re going, you must know where you’re coming from so you can plan.
Order a copy of your report from all three credit bureaus and check out your score. When you get your credit report, check for any possible errors and get a handle on your current debts. It is only by examining your credit report that you will know your starting point, clean up errors, and get started rebuilding your credit for a brighter future.
Open a new bank account
It can be wise to open a new bank account post-bankruptcy and close out any older ones you had while you were in debt. This gives you a fresh start and makes sure there’s no lingering debt associated with your old bank account. Open both a checking and a savings account so you can work on building up an emergency fund if you don’t already have one.
Check with your bank to see about setting up automatic online bill pay. This way, you’ll pay your bills on autopilot, never miss an installment, and rebuild your credit score in the process. Paying all your bills on time is essential to making the most of your fresh financial start after your bankruptcy discharge.
Get a secured credit card
To improve your credit score dramatically, you must establish a track record of handling credit responsibly. You might be gun-shy about having credit cards in your wallet after your recent debt dilemma, but credit cards are the fastest way to re-establish credit. You’ll likely have to start with a secured credit card, depending on your credit score a few months after discharge.
Be sure to check options and compare interest rates and annual fees. Since you are just coming out of bankruptcy, you won’t get the best interest rates and may have to pay an annual fee. Do your homework to make sure you qualify before you apply because applying for credit can lower your credit score. Don’t apply often and be sure you’ll be approved before you apply.
Pay off your credit cards each month
On your credit improvement journey, one way to demonstrate to creditors that you are a good credit risk is to pay off all your plastic monthly. Using your credit card responsibly then paying it off in full will keep interest charges from piling up. You need activity to get credit line increases which, in turn, help your credit score.
Only carry over balances month-to-month in case of emergency. Allowing credit card interest to pile up can be a slippery slope back into the swamp of financial trouble. Use your cards modestly for recurring small-ticket items like Netflix and your cell bill so you get usage without spending wastefully or on things you cannot afford.
Monitor your credit report
While you are working towards rebuilding your credit, make sure to monitor your credit report. Not only will it boost your morale as you watch your credit score climb, but it’s the best way to stay on top of identity theft, fraud, and errors that can drop your score. Credit monitoring services can be free or low-cost and will alert you when your score rises, drops, or if there are fraud alerts.
If you’re rebuilding your credit after bankruptcy, be sure to check out Credit Score Keys to see how we can help.