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If you chose bankruptcy to deal with your debt, it could be life-changing for the better. But after you get your bankruptcy discharge, it’s time to start the work of rebuilding your credit. Within a few months of your discharge, you should start seeing credit card offers in your mailbox. The first offers may not be the best, and you need to be cautious and strategic as you re-establish your credit but it’s worth the effort. Having a good credit score gives you opportunities (and can save you money) throughout your life. Here are five times a good credit score can be critical.
1 – When buying a car
Sure, you can buy a car with bad credit, but it won’t be a decent deal at all. Buy here-pay here lots offer credit to almost anyone but then charge interest rates similar to (or worse than) credit cards. This can be a trap that leads to unaffordable car payments and, ultimately, repossession.
By first building up your credit score, you can get a much better deal on a new or used auto than you could with crummy credit. Better credit can be the difference between an interest rate in the low single digits versus one in the unreasonable double digits.
2 – When buying a home
As a rule, you can’t file bankruptcy then turn around and buy a house unless you score a deal with an owner that is willing to self-finance and doesn’t care about your credit. This would be a rare opportunity, and most people get a mortgage the good old-fashioned way – through a lender.
It can take two to three years after a bankruptcy discharge to be approved for a mortgage. In that time, if you build up your credit score as high as possible, you increase the odds of obtaining a loan through a reputable lender at an affordable interest rate.
3 – When getting a job
Increasingly, employers are running pre-employment credit checks, even for jobs unrelated to cash-handling, finance, or inventory. Eleven states bar overly intrusive credit checks for jobs, but in North Carolina, there is no such ban, and you can be asked for a credit check on any job.
By filing bankruptcy and getting a discharge, you shed unmanageable debt which is helpful and looks better than a roster of unpaid debt when a potential employer runs your credit. Follow this up with cleaning up your credit, opening new accounts and paying responsibly, and you’ll look even better.
4 – When buying auto insurance
The worse your driving record, the costlier your auto insurance. The same is true of your credit score. While it seems unfair to equate your driving abilities with your credit, it’s a fact of life. The lower your credit score, the higher will be your auto insurance expenses.
Rebuilding your credit, while also avoiding tickets and accidents, can reduce insurance costs. This is increasingly important if you plan to use your better credit to buy a new car. Since auto lenders require comprehensive insurance, which costs more, you need every break you can get.
5 – When starting a small business
If you have aspirations of entrepreneurship, having a good credit score is critical. When you open a small business, it’s your credit that opens doors to obtaining rental property for your business, equipment loans, and lines of credit at the bank to fund your operations.
For those hoping for a Small Business Administration (SBA) loan, a decent credit score is required. Vendors that would supply goods or services to your new company may also check your credit. They want to know that you can handle your finances as well as business finances.
You might think that your credit score is “just a number” and it is. However, it’s also the metric used to evaluate what you will pay for certain services like utilities and insurance. It’s also the yardstick to determine whether you can purchase a home or vehicle. That’s why it’s so important to rebuild your credit after your bankruptcy discharge. To find out more, check out the tools offered by Credit Score Keys.