5 STEPS TO IMPROVE YOUR CREDIT AFTER BANKRUPTCY
Your credit rating is made up of a number of factors in your credit history. The most common rating is called a FICO score, and is a product of the Fair Isaac Corporation.
Your credit rating, or FICO Score, is made up of your payment history, the number and types of accounts, the balances, the ratio of balance to available credit, the ratio of debt to income, length of time accounts are open, and any collection or judgments or other public records.
Missed payments, defaults, charge-offs, and judgments all hurt your credit.
So how can Bankruptcy improve your credit? Because Bankruptcy draws a line in the sand and says “nothing is allowed to come after me anymore.” The past “happenings” are no longer scored. This is not to say that they don’t exist, only that they are not scored.
But what can you do to help yourself make the Bankruptcy?
- Pay your bills on time. If you don’t pay your bills on time, then no amount of other work will help. The law on credit reporting is about accuracy, not technical violations, so if it is accurate, no matter how bad they screw up, there is nothing to pursue.
- Review your credit reports annually. You get 1 free credit report annually from each of the credit reporting agencies every year. Instructions on how to order can be found here.
- Keep your balances low, but not too low. Optimum score is obtained when your credit balance is between 20 and 30 percent of your available credit. Higher is worse than lower.
- Don’t open lines of credit that you don’t need, but you need some. Too many lines of credit makes your debt to income ratio go in the wrong direction. But too low, and it looks like you are not participating in the credit system.
- Transfer balances ONLY if it benefits you. A lower interest rate or a higher available credit can work to your advantage.
Remember that if you don’t follow rule number 1– pay your bills on time– none of this matters.
Credit scores take a hit from the Bankruptcy, or any other activity that negatively impacts your score, but you can bounce back pretty quickly.
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