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Tip: Use Your Credit Cards to Protect Your FICO Score

Rachel — Thu, 17 Aug 2017 13:04:17 +0000

Tip: Use Your Credit Cards to Protect Your FICO Score Rachel Thu, 08/17/2017 - 09:04

Your credit card accounts can be closed without notice
Image Source: Pixabay.com

Although it seems counter-intuitive, the fact is that if you do not use your credit cards, it can (indirectly) harm your FICO score. You might think it’s enough to have a few credit card accounts in your name, that you rarely or never use so that you have items on your credit report. However, if you leave your cards unused, you can find yourself slammed by your card issuer out of the blue – and your credit score can drop as a result. Here’s what you need to know.

Credit Card Issuers Expect You to Use the Plastic

First, as a card holder, you are a customer to the credit card issuer. However, if you don’t transact by swiping the card now and then, you’re not a good customer. Card issuers make money in a few different ways. One is if you carry balances month to month and they can charge you interest. Another is off fees like annual fees, over-limit and late payment fees.

But even if you pay your balance in full each month, never run late, and never go over the limit, your credit card provider can still make money off of you so long as you use your card. Stores, restaurants, and any business that allows you to use a credit card pay out a percentage of each sale for the privilege. But if you have no activity, there’s no profit and no incentive for them to stick with you.

Account Closures Can Come with No Notice

If you leave a card account fallow and don’t use it for an extended time, the credit card issuer can close the account without any prior notice. That document with the microscopic fine print that comes with your card and is labeled “terms and conditions” includes a list of a whole host of reasons the card issuer can suspend you as a customer and take back your charge privileges.

You will get a notification that your card account was closed but might not know ahead of time that it’s coming. If you have a pattern of not using your card, the issuer has no profit incentive to keep you on their customer roster, no matter how long you’ve been a card holder. Using your cards, even occasionally, goes a long way to convincing card issuers to keep you as a customer.

Losing an Older Account Lowers Average Age of Credit

Your credit score is a calculation based on several factors. One of these is the average age of credit. This is calculated as a simple average. You add up the numbers of years all your revolving credit lines have been open and divide it by the number of accounts you have. Let’s say you have five cards and the oldest has been open for 12 years, one for seven years, two for five years, and one for one year.

The average age is six years (12+7+5+5+1/5). If you aren’t using your oldest card and the issuer shuts the account, your average age drops to a little more than four (7+5+5+1/4). This can cause your credit score to take a dip even though none of your behavior has changed and you’re not any deeper in debt or delinquent on your obligations. Keeping older accounts open is advantageous.

Any Account Closure Can Wreck Your Utilization If You Carry Balances

Not only can an account closure drop your credit by reducing your average age of credit but it can also cause a major drop if you’re carrying a balance. For instance, if your oldest card has a higher rate of interest because your credit wasn’t as good when you got it, you might not use it. Then suppose you just had a big car repair and couldn’t pay it all off, so you’re carrying a balance.

If the five cards have a combined credit limit of $10,000 and you’re carrying a $2,500 car repair balance, you’re at 25% utilization (2500/10000=20%). Then say the oldest account is closed and it had a $3k credit limit. Note that your utilization is instantly higher at 36% (2500/7000=35.7%). That’s way too high, and your credit score can drop with no other changes to your credit profile.

When It's Okay to Close Accounts

Sometimes when you’re just starting out, you might obtain a credit card with a higher interest rate or an annual fee that you don’t like. If you’re a customer in good standing, you might be able to negotiate better terms and get rid of the annual fee or drop the interest rate. If you don’t carry a balance, the interest rate doesn’t really matter.

So long as you’re not carrying balances and closing the account won’t wreck your average age of credit, it’s no big deal, but be aware of the consequences before you close an account. To avoid having an account closed involuntary, you should use all your cards regularly. Consider setting up small recurring items, one to each card such as your cell bill, Netflix, etc. and then pay off in full each month.

To find out more about improving your credit after bankruptcy, contact Credit Score Keys. Call (844)659-3226 to set up a free consultation today to get your credit score on the right track.

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How Using Cash Advances Can Hurt Your Credit Score

Rachel — Thu, 10 Aug 2017 13:04:06 +0000

How Using Cash Advances Can Hurt Your Credit Score Rachel Thu, 08/10/2017 - 09:04

Cash advances come at steep costs
Image Source: Pixabay.com

Most credit cards offer the option to take a cash advance. Some card issuers send out blank checks you can write that, when cashed, will operate as a cash advance. Others provide a pin number so you can easily take out cash at an ATM or while checking out at the grocery store. Others allow you to go to the bank, swipe your card, and walk out with money. No matter the mechanism, taking out a cash advance is something you should consider carefully because of the consequences. If you’re rebuilding your credit after bankruptcy, you should be extra cautious of using a cash advance.

Taking a Cash Advance Won’t Directly Hurt Your Credit Score

The first thing to know is that taking a cash advance will not directly drop your credit score. So, you can breathe easy if you need to take a few hundred dollars on one of your cards in an emergency. There’s no instant and associated penalty on your credit report for using a cash advance. However, there are other consequences of taking cash from a card that can come back to bite you.

Using Cash Advance Increases Utilization

One way that using a cash advance can indirectly lower your credit score is by increasing your utilization. This is calculated as the percentage of your available credit that you’re tapping. If you have $5,000 in total credit line across all your cards and carry no balances month to month then take a $500 cash advance, that’s not too big a deal.

That $500 represents the use of 10% of your credit line and is not high enough to trigger a ding to your credit score. However, given the same credit lines, if you’re carrying $1,500 in card debt and take out $500 in cash, that bumps you to $2,000 which is 40% credit utilization which is way too high and will lower your credit score. So, mind your balances.

Taking Cash From a Card Comes at a Higher Interest Rate

It’s also important to remember that a cash advance doesn’t operate like a regular credit card purchase. Most credit cards offer one interest rate for purchases and a much higher one for cash advances. So, while paying your cell bill with your credit card comes with an average interest rate of about 15%, cash advances run one to seven percent higher (but can be much more depending on the card).

This means you can be charged 16%-22% for a cash advance but with some cards, cash advance interest is much greater. If you must take a cash advance, paying it off ASAP before your statement cuts should avoid the interest charge. Taking a cash advance should be treated as a big decision and one to use only when no other less-costly option is available.

Upfront Cash Advance Fees Are Common

In addition to the steeper interest rate, many cards charge a fee to access the cash advance feature. You can be slapped with a $10-$20 cash advance fee that’s tacked onto your card balance immediately. In some cases, the cash advance may be even higher – the ten to twenty mentioned here is an average. Your card provider may assess a much steeper upfront charge.

That charge is on top of the interest charge, and itself will accrue interest. So, for instance, if you take out a $100 cash advance and your lender assesses a $20 fee, right away that’s a 20% premium charge, and then interest charges pile up on top of that. If you don’t pay the cash advance back ASAP, there’s no telling how much that $100 will cost you in the long run.

Cash Advances Should Be Avoided When Possible

Because of the higher interest rates and fees associated with cash advances, they should be avoided when possible. If you need cash to pay a utility bill, why not pay the bill using your card instead of taking out cash? That way you’ll only pay standard interest. If you need to pay someone back or loan them money in a crunch, consider sending money through PayPal funded through your credit card. That way it’s like a standard purchase rather than a cash advance.

As with any credit card purchase, paying off the balance ASAP, before interest accrues is the best route to avoid getting in over your head with credit card debt and racking up costly interest. Did you know you can pay off your balance before the statement cuts? You can easily access your card accounts online and pay through the issuer’s website a few days before the statement closes to avoid interest charges.

To find out more about rebuilding your credit after bankruptcy, contact Credit Score Keys for a free consultation. Call 844-659-3226 today to talk to one of our credit experts.

Resources:

Costs of cash advances

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How Does Your Credit Score Stack up to the Average American’s?

Rachel — Thu, 09 Feb 2017 08:07:29 +0000

How Does Your Credit Score Stack up to the Average American’s? Rachel Thu, 02/09/2017 - 03:07

Is your credit score above average?
Image Source: StockSnap.io

The latest survey by FICO (Fair Isaac Corporation) shows that, in general, American consumers’ credit scores are on the rise. In case you’re wondering how your credit score compares to others, the average in the United States is a 700 FICO score. Here is more info from the FICO survey and what you can do to increase your credit rating.

FICO Survey Results
Based on the latest score calculation, FICO 9, those aged 43 and up have the highest credit scores averaging at about 816. For those aged 29 and under, scores average closer to 770. Those with the highest scores have an average of 128 months of history.

The average age of credit is critical to a higher credit score, and those with the best scores have 305 months on their oldest lines of credit. That’s a whopping 25 years of credit history that can boost your score - but length of history and the average age isn’t everything.

Those with higher scores open new accounts less frequently and have an average of nine months between hard pull credit inquiries. Not surprisingly, those with higher scores also have a track record of on-time payments. Close to 95% of those with the highest scores have no delinquencies.

What Drives Your Credit Score?
FICO keeps the exact algorithm of its credit score calculations - they do share the factors that weight into the score. FICO scores range from 300 to 850. The largest chunk of the calculation derives from your payment history – it makes up 35% of the score.

Balances owed makes up 30%, and that’s the utilization factor. It’s not just how much you owe but the percentage of how much you owe compared to your available credit lines. Credit mix counts for 10%. That is the blend of revolving credit and installment loans.

Another 10% is new credit so periodically adding new accounts to your credit roster can boost your score, but isn’t the most critical factor. The final 15% of the calculation is the length of credit history. That means it’s wise to keep older accounts open and in good standing.

How Can You Improve Your Credit?
When you’re rebuilding credit after bankruptcy or striving to improve your credit, you must be very mindful of your habits and the choices you make. Paying your bills on time is the foundational behavior that will help keep you on track.

Avoid credit card overuse and carrying large balances. Keep your utilization low and don’t charge things that you can’t afford. Using credit to live a lifestyle above your income level is never a wise financial move. Use cards and pay off in full each month where possible.

Occasionally open new accounts, but only apply for things you’re certain you’ll be approved for – and that means doing your homework. Improving your credit is a process that takes time, diligence and patience, but can be quite rewarding.

Work on Your Credit ASAP After Bankruptcy
Credit Score Keys works with people that have filed bankruptcy and are looking to boost their credit scores now that their debt is under control. There is a persistent myth that filing bankruptcy wrecks your credit for a decade but that is not at all accurate.

Within a couple of months of receiving your bankruptcy discharge, you can start working on your credit. Step one is to check your credit report for errors. Step two is to research a secured credit card that will accept your bankruptcy past. Step three is to use the card wisely.

The next step is to work on getting an unsecured credit card and build from there. Re-establishing your credit score after bankruptcy is a slow process but one that should be started as soon as possible after your discharge to get you on the right track.

To find out more about improving your credit score after bankruptcy, contact Credit Score Keys today for a free consultation. Call 919-495-2365 today to discuss your credit and how we can help.

Resources:
FICO score survey

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6 Tips to Improve Your Credit After Bankruptcy for a Better FICO Score in 2017

Rachel — Thu, 02 Feb 2017 08:41:58 +0000

6 Tips to Improve Your Credit After Bankruptcy for a Better FICO Score in 2017 Rachel Thu, 02/02/2017 - 03:41

Get a better credit score in 2017
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A healthy credit score is critical to be approved for loans, get affordable financing, and pay a lower cost for many types of insurance and utilities. A recent survey by the American Bankers Association says just 60% of consumers checked their credit report last year.

Many consumers don’t understand how credit scores are calculated or how to improve one. There is no overnight cure for a low credit score, but there are strategies to apply to improve it over time. Start now, and you can have a better score before you know it. Consider these tips.

#1 Start Secured
After bankruptcy, you won’t have any credit card accounts. That’s the first place to start. Most consumers must begin with a secured credit card after bankruptcy, but all secured cards are not the same.
Do your homework and choose one that doesn’t have high annual fees, a ridiculous set-up fee, and over-the-top interest. Also, research to see which secured card issuers will work with recent bankruptcy filers – not all will do so.

#2 Check Your Report
Many bankruptcy filers gave up on monitoring their credit score because they know it’s not good news. After your bankruptcy discharge, pull your credit report from all three bureaus – Experian, TransUnion, and Equifax.
Make sure all accounts listed in your bankruptcy petition reflect a zero balance from the discharge. Also, look for accounts that are fraudulent or inaccurate and get those cleaned up by contacting the bureau and filing a dispute.

#3 Track Your Credit Score
To confirm your credit score is improving, you must know your starting point. Your credit report is not your credit score - don’t confuse the two. Discover offers a true FICO score to everyone – not just Discover card holders.
To get your true FICO score, visit credit score card dot com and get a free account. You’ll get the same score most potential creditors use, and you’ll get a quick rundown of what factors are helping or hurting your score.

#4 Apply for New Credit Strategically
It’s important to get a credit card account ASAP after bankruptcy discharge because one factor in your credit score is the average age of credit. Older accounts help you so even when you get unsecured cards, keep your older accounts.
New accounts also help your score but don’t apply for credit without being sure you’ll be approved. Research online credit forums to find out specific criteria and make sure you apply strategically, so you don’t get denials.

#5 Pay Off Balances in Full
You never want to fall into a trap where you get in too deep with credit cards. Cards are essential to improve your credit score, but you shouldn’t carry balances month to month. If you do, you’ll be stuck paying interest.
Instead, use cards wisely, perhaps for utilities and other necessities. You can pay off regularly and in full and don’t buy things you don’t need. If you pay off before your statement date, you shouldn’t incur any interest.

#6 Get New Credit but Use It Sparingly
Another part of your score is utilization. Your utilization is calculated as the percentage of balances owed on revolving credit compared to your total available lines of credit. If you have $10,000 in credit lines, that’s the first part.
If you have $2,000 in balances, that’s 2000/10000 = 20% utilization. That's not terrible, but lower is better. When you get new credit, it helps your utilization but only if you don’t use it. Keep your balances at low or zero for best results.

Make the Most of Your Fresh Start
After you get a bankruptcy discharge, it’s time to work on improving your credit score. There is no time to waste. If you’re not sure where to start, contact Credit Score Keys for assistance. We help North Carolina consumers improve their credit scores after bankruptcy.

Resources: ABA Survey
Discover Score Card

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Changes to FICO Credit Score Calculation Can Benefit Those Dealing with Medical Debt

Rachel — Thu, 18 Aug 2016 07:04:26 +0000

Changes to FICO Credit Score Calculation Can Benefit Those Dealing with Medical Debt Rachel Thu, 08/18/2016 - 03:04

FICO score changes may impact the effect of your medical debt on your credit
Image Source: Flickr CC User Jay Gorman

The purpose of a credit score is to help potential creditors and lenders assess whether you’re a good risk for a loan, credit card, or other debt. Your credit score should reflect your financial behavior. But when it comes to medical bills, your FICO score sometimes puts you in a worse light than you deserve. Fortunately, new credit score models may change some aspects of your financial track record – including medical debt.

New Scores Will Reduce the Impact of Medical Bills

Before the new FICO scoring models were developed, all bills weighed similarly on your credit report. Leaving a credit card bill unpaid could affect you in the same way that an unpaid doctor bill would – but medical debt is often not an accurate assessment of your financial behavior. Even those with health insurance (a greater percentage now thanks to the Affordable Care Act) can still be stuck with unmanageable out-of-pocket costs through no fault of their own. In fact, roughly 20% of US workers (those out of school and pre-retirement) have medical debt they cannot afford to pay.
And some cases, medical bills may linger because the consumer is working with their physician or insurance company to get a billing issue corrected for an expense that insurance should have covered. In other cases, the medical provider might not send their statement to the patient in a timely manner – or the insurer could mishandle the bill. Under the old FICO scoring model, all this would have negatively impacted your credit score.

How FICO 9 Calculations Change the Weight of Medical Bills

The FICO 9 score lessens the impact of medical debts in collection on your credit score. You may not realize this, but when one of your debts goes bad and your creditor turns it over for debt collection, this event triggers a second entry on your credit score. You may end up with two entries for a single debt – one from the creditor and one from the debt collection agency. In some cases, that means the effect on your credit score can be doubled.
But with FICO 9, medical debt collections will carry lesser weight. If medical bills are your only negative items, you may see a credit score increase of 25 points or more from nothing more than this change in the calculation. However, it’s important to know that not every creditor or lender will use this new scoring model. The FICO score is a subscription service, and creditors can subscribe to whichever version of the score they prefer.

Who Will Be Affected by the New Scoring Model?

Veterans, in particular, may be harder hit by medical bills if they rely on the VA for their medical care. If the VA is slow about processing a service payment for medical treatment for a veteran, the veteran may end up with a collections agency pursuing them for debts the VA should have paid. That doesn’t seem fair, but it’s the harsh reality. But with this new scoring model, the effect of the VA’s late payment habits would not affect a veteran’s credit score as much.
Do you have medical bills you can’t pay? If you’re overwhelmed with doctors' bills and can’t dig your way out, Chapter 7 bankruptcy offers the chance to have all your medical bills completely discharged within weeks of filing. This can be life changing. Then, after you file bankruptcy and clear your financial slate, you can get a fresh start by working to improve your credit score.

To find out more about rebuilding credit after bankruptcy, contact Credit Score Keys today. We help North Carolina consumers bounce back after bankruptcy and get the credit they deserve. Call 919-495-2365 today for a free consultation about improving your credit score after bankruptcy.

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5 Steps to Improve Your Credit Score Easily

Rachel — Thu, 14 Jul 2016 07:29:06 +0000

5 Steps to Improve Your Credit Score Easily Rachel Thu, 07/14/2016 - 03:29

Take steps to improve your credit score
Image Source: Flickr CC User Ozzy Delaney

For many people, figuring out how to raise their credit score is a mystery. That’s because they don’t understand what factors into the score, how it’s calculated and how to manipulate those factors in their favor. In fact, once you understand how scores work, you can take proactive and simple steps toward improving your credit score. Here is a look at five steps you can take to raise your score through a tested and proven process.

#1 Get Credit

This seems counterintuitive. The reason you want a higher credit score may be so that you can get credit like a car loan or mortgage. However, you have to start somewhere to build up. If your credit score is middling to low, you’ll likely need to start with a secured credit card. If your score is average or a bit higher, you can start with an unsecured card.

Store cards can be a middle ground between secured and unsecured cards because they can be easier to obtain than unsecured credit cards but better than a secured card. However, interest rates are usually higher for store cards – and also for any card, secured or unsecured, that you get while your credit score is low. However, that doesn’t matter if you use the line properly.

#2 Use, but Keep Utilization Low

Utilization is important when factoring your credit score – it's the amount of credit that you actually use. However, utilization is calculated at the time your statement closes. For instance, if you have a $300 credit line and when your statement is issued, you have a $200 balance, that’s a 67% utilization, which is high and can wreck your credit score even though your card isn’t maxed.

Ideally, you should pay off your balance before your statement cuts. You can monitor your balance online and make a payment before the monthly closing date, and the statement will issue with a zero balance. That means no interest charges and a higher credit score. You don’t want to simply NOT use your cards, though, because then the creditor won’t bump your credit limits, which is important as well.

#3 Don’t Swipe if You Can’t Pay Cash

Using your credit card so that the creditor sees you’re active is the best way to get regular credit line bumps. The higher your credit line, the better your credit score will be. However, you also don’t want to carry balances. This should be your benchmark: if you can’t afford to pay cash for something, don't buy it with plastic.

Using your card for gas or groceries is often a smart solution. Since it’s money you have to spend anyway, use your card for it, then turn around and pay it off in full. You can pay on your credit cards multiple times during the month using online bill pay or through the card issuer’s website. Never, ever pay late – that causes stiff late fees and penalties. And never, ever go over your limit – that tanks your score, maximizes interest, and triggers more fees.

#4 Don’t Accumulate Debt

Credit card debt can be a slippery slope, particularly if you’re coming out of a bankruptcy. Many North Carolina consumers who have filed bankruptcy before are gun-shy when it comes to credit. They often want to avoid it altogether because they’re scared to get in over their head again. This is understandable but is not the path to improving your credit score.

You don’t want to rack up credit card debt, but you have to use your cards to keep your credit limits climbing and your credit score improving. Use your cards, but be cautious how you do it. Paying bills with your cards can be one way to ensure you’ve got utilization without racking up debt. Most utility services will allow you to pay bills with plastic, which you can in turn pay off online ASAP.

#5 Get Better Cards and Monitor Your Score Constantly

You should be monitoring your credit score constantly – there are a number of free and low-cost monitoring services you can sign up for to keep track of your score. Watch for errors, illicit activity, and improvement in your score. As your score climbs, you should apply for new cards with better terms. Why? One of the aspects of your credit score is new credit accounts.

In a nutshell, you can have lots of credit accounts, all in good standing but your score can fall if you don’t occasionally apply for and get new lines of credit. As your score increases, apply occasionally for new cards but also keep your old lines of credit open. Closing older cards can drop your credit score because the age of your average credit accounts also counts in your score.

Getting and keeping a better credit score isn’t something you can allow to happen on its own organically – it’s something you have to work at, particularly after you file bankruptcy. To get help with improving your credit score after bankruptcy, contact Credit Score Keys today.

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How Is Your Credit Score Calculated? Here Are the Details

Rachel — Thu, 07 Jul 2016 07:30:54 +0000

How Is Your Credit Score Calculated? Here Are the Details Rachel Thu, 07/07/2016 - 03:30

How is your credit score calculated
Image Source: Flickr CC User amboo who?

Even though your life shouldn’t revolve around money, the fact is, finances are important and your credit score matters. Most people know they should strive for good credit, but when it comes to how this score is calculated, and how to improve it, many North Carolina consumers don’t understand the nitty gritty details that drive the calculation.

What Is a FICO Score?

FICO is an acronym for the company that invented the most-used credit score calculation – Fair Isaac & Company. FICO scores are used by all three credit reporting agencies – TransUnion, Experian and Equifax – although each uses a slightly different calculation. FICO scores and credit reports are NOT the same thing.
Think about it this way: Your credit report is a roster of your activities. It shows your loans, credit cards, collection accounts and other activity related to debt and creditors. It’s simply a list of your open and closed accounts over the past seven to 10 years, plus activity on those accounts, balances owed, the type of debt you're taking on, and whether you’re current on your obligations or not.
From that information, a FICO or credit score can be calculated. Different aspects of your report are evaluated by the three reporting agencies to come up with your score. Scores range from roughly 300 to 850 depending on the credit agency and score methodology they used.
A score below 500 is considered a “bad” credit score. Scores under 600 are considered “poor.” Fair scores are 601 to 660, 661-780 is “good” and 780 and up is “excellent.”

How Is the Score Calculated?

Five elements play into the math of the credit score calculation. Payment history, amounts owed, length of credit history, types of credit accounts, and recently opened credit accounts are all factored in. Payment history is the most important component, making up 35% of your calculation.
Balances owed makes up 30% and, as such, are the second most weighted component. Length of credit history makes up 15% of your credit calculation. Types of credit accounts and new credit accounts each make up 10% of the score calculation. What this means is that your payment history is the most important aspect of your credit score calculation.
If nothing else, always paying your bills on time, particularly those that report to credit agencies, is the first step toward protecting and improving your credit score. Your score is important even if you’re not planning on applying for new credit since it determines many other things in life.
For instance, your credit score may determine whether or not you must put down a deposit to get utility services, how much you pay for variable rate services, and whether you can be denied for “non-essential services” such as cable and Internet. Credit score also factors into acceptance and rates for car insurance and certain leasing agreements.

The bottom line is that, like it or not, your credit score matters. If you recently filed North Carolina bankruptcy and are looking for ways to improve and rebuild your credit score, contact Credit Score Keys now for a free consultation on cleaning up and improving your FICO score after bankruptcy.

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5 Do’s and Don’ts When You’re Ready to Move from Secured to an Unsecured Credit Card

Rachel — Thu, 30 Jun 2016 07:19:44 +0000

5 Do’s and Don’ts When You’re Ready to Move from Secured to an Unsecured Credit Card Rachel Thu, 06/30/2016 - 03:19

Do's and Don'ts for Credit Cards
Image Source: Flickr CC User Yoel Ben-Avraham

When you’re rebuilding your credit score after bankruptcy, you'll typically start by opening a secured card – but eventually, you'll have to move on to an unsecured one. How do you know when you’re ready, and how do you make the move from secured to unsecured credit cards? Here are five do’s and don’ts as you get ready to take this step.

#1 Do Your Prep Work with Your Credit Reports

If you’ve obtained a secured card and have used it and made regular on-time payments, you should be off to a good start. But before you make the move to an unsecured card, you need to understand where you stand. Pull copies of all three of your credit reports – Transunion, Equifax, and Experian. Check for errors and make sure accounts that should show a zero balance because of your bankruptcy case are, in fact, listed this way. Clean up any issues before you start applying for an unsecured card.

#2 Don’t Cancel Your Secured Credit Card

One of the components of your credit score calculation is your average age of credit. Because your secured credit card is likely your oldest post-bankruptcy credit (unless you have a mortgage or auto loan), if you close the secured account when you get an unsecured card, your average age of credit will fall and your credit score will plummet. It’s best to leave the account open and just use the card minimally to keep it active.

#3 Do Your Research

You should not apply for credit cards that you won’t qualify for, but how do you know which cards you can get? Nerd Wallet has a great comparison tool for credit cards that can help you find cards for your credit score bracket. But credit score isn’t the only factor. Some card issuers will also consider how many inquiries are on your credit report, how many new accounts you’ve opened recently, and how fresh your bankruptcy filing is.

#4 Don’t Apply for a Ton of Cards at Once

Once you narrow down some credit cards you believe will fit your credit score and profile, you’re ready to apply. Not every card issuer uses the same credit report. As part of your research, you should find out what agency they pull from. You can then apply for three cards – one per agency. If you are turned down for a card, contact customer service and ask if there is another card you qualify for instead.

#5 Do Use the Cards Responsibly

Once you get an unsecured card, use it regularly and never max it out. Pay the balance in full each month. Better yet, pay online during the month before your statement cuts so that you have a zero balance. Always make your payments on time. The combination of regular, responsible usage and prompt payments should result in increased limits periodically. Higher credit limits will help your credit score but should not be tapped for spending.

Bonus tip: Your first call should be to your secured card issuer to see if you can convert your secured card to an unsecured credit card. This may not even involve a hard inquiry on your credit report since card issuers routinely monitor credit scores and will already have your info on hand. This may be the simplest (and fastest) way to get an unsecured card. If the issuer won’t convert, ask if they have an unsecured card you qualify for in addition to your secured one.

To find out more about improving your credit score after bankruptcy, contact Credit Score Keys today!

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7 Habits That Can Improve Your Credit Score Fast After Bankruptcy

Rachel — Thu, 23 Jun 2016 03:32:11 +0000

7 Habits That Can Improve Your Credit Score Fast After Bankruptcy Rachel Wed, 06/22/2016 - 23:32

Habits to improve your score after bankruptcy. Image Source: Flickr CC User Julie Rybarczyk

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…

#1 Apply for Credit Cards Wisely

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.

#2 Stagger out New Accounts

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.

#3 Don’t Cancel Old Credit Cards

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.

#4 Keep Balances at Low or Zero

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.

#5 Pay off Collection Accounts

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.

#6 Pay Often and Early

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.

#7 Monitor Your Credit Score and Report

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.

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.

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