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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