Everyone who files for bankruptcy is concerned that their credit report will nose dive and never be repaired. While time will help, credit is important for the expensive things we need in life like a car or a home. To qualify for financing, you do need good credit. While bankruptcy does impact the credit score, there are a few simple ways that can dramatically improve your credit after bankruptcy.
(1) Apply for a Credit Card
After you are discharged of your debts, apply for a credit card. This revolving credit helps build your credit the fastest. Since credit card usage changes every month, it creates a history of use and payments which are important to the analytics of credit scores. If you are unable to get an unsecured credit card, you should apply for a secured card. This card requires that you provide a deposit (security) to the credit card holder as a form of protection in case you default on payment. This type of credit card also rebuilds your credit. However, supplementary credit cards (a secondary card on someone else’s card) does not rebuild your score. It only affects the primary holder.
(2) Don’t Over Apply
When consumers are having financial problems, they often apply to several lenders for credit to get them through a rough patch. Every time you apply, the credit application hits your credit score. Apply too often in a short period of time and the analytics recognize what may be happening and it drags down your credit score. This is the opposite of what you want to have happen. If you do apply with several lenders, take your time and space them out over several months
(3) No More Than 3 Cards
People who have financial issues often apply for several cards to get them through the hard times and “rob Peter to pay Paul” or kite payments from one card to another. Having more than 3 cards sends a signal to credit score analytics that you may be having a debt issue even if the cards are up to date. When it comes to credit cards, remember the moto “Less is best”.
(4) Stay Under 75% Limit
The closer you creep to your card limit, the more the analytics think you may be having money problems. This is especially true if you pay only the minimum payment each month for several months (or several years) and are almost at the credit card spending limit. We recommend you stay below 75% of your credit card limit and pay more than the minimum payment each month to avoid the score from taking a hit.
(5) Pay on Time
This seems like a simple principal to follow but remembering due dates is often difficult. Know when your payments are due each month and pay the day before they are due. We suggest making alerts on your phone of due dates. This guarantees that payments will not reflected as late. Payments made on time show the analytics that you are aware of what commitments you have each month and take them seriously. If you don’t have a credit card, you can still show monthly commitments up to date by paying your cell phone and other utility bills on time.
To put it simply, think of your credit score as a smoothie. Into a blender goes many factors such as employment, types of credit, consistency of payments, delinquency and spending limits to mention a few. The credit score analytics continuously hit pulse and blend up a vitamin rich delicious smoothie or a bitter lumpy smoothie that no one likes. A good credit score just doesn’t happen overnight. It takes time, patience and a bit of smarts to make the right financial choices to boost the score for the future