Rebuilding Credit and Improving Your Credit Score After Bankruptcy
Not everyone understands how important it is to improve your credit score. That is until they find themselves in circumstances where credit score is extremely crucial. This could include proceeding with a credit card application, borrowing from a specific lender, or other instances where your credit history will determine if you can get credit or not. Almost always, a potential creditor will check the credit report of the borrower. It is important to improve your credit score since a good credit profile can help you qualify for credit cards or loans and get lower interest rates, both of which can affect your financial future.
Credit scores are generally calculated by lenders or financial companies by applying a certain algorithm to data in credit reports. Among the most common credit-scoring models is the FICO score. This takes into account your payment history, revolving credit, applications for new credit, and other factors that could influence your credit rating.
For several years, bankruptcies stay on and can affect your credit report and score. They can be seen by anyone who will check your credit scores. Building your credit, however, can be a little less difficult if you check your credit report regularly and take steps that can help raise your credit score.
Credit utilization ratios, repayment patterns, and creditor reports are just some of the many credit score factors being considered. As such, it is important that you pay your bills and promptly make monthly payments for your credit card bill, auto loan, student loan, or any other loan. Avoid making payments past the due date. Payback what you owe, and pay it within the specified period.
Your credit utilization ratio is the sum of your credit card balances divided by your credit limit, across all bank accounts and card companies. Keep your credit utilization ratio low by keeping your credit card balance low. If possible, do not close your unused credit cards. Despite the annual fees, they are useful in decreasing your credit utilization ratio, building good credit, and increasing credit scores.
Check your credit reports through credit reporting bureaus so you can spot and dispute incorrect information or inaccuracies, when applicable. Credit monitoring helps you avoid actions that lead to bad credit. Furthermore, avoid opening new credit accounts since these can lead to hard inquiries, overspending, and future credit problems.
A good credit score will allow you to get a credit card and borrow money under favorable terms and with low-interest rates. As such, make sure you take these things seriously. Rebuilding credit after bankruptcy is not easy, but it is also not an entirely impossible feat. Make it a habit to try checking your credit report and credit scores regularly.
Do not let a bankruptcy set you back at a chance for a fresh start in your financial life. Build your credit and revamp your financial outlook.