According to some financial advisors, the secret to rebuilding your life after bankruptcy is to never use credit again. Unfortunately, it is not always reasonable to expect individuals to be credit-free. In addition, avoiding credit will not do much to improve your credit score, and credit is still important.
Credit scores are not only essential when shopping for large mortgages or automobile loans. The impact of a high credit score extends beyond interest rates. For instance, your insurance premiums are likely to increase if your credit is poor. If your credit score is too low, applying for certain bank accounts may be difficult. Potential employers continue to check your credit score. If you have poor credit and have filed for bankruptcy, you may be required to make hefty deposits whenever you rent an apartment or establish a utility account. These deposits can be a financial burden at a time when you can least afford it.
These institutions do not necessarily examine your credit report line by line to determine your actual financial behavior. They are considering a number and making decisions based on what that number suggests.
The most essential thing you can do is to pay all of your bills on time, including those that do not directly affect your credit score. This prevents future collection accounts from being reported to your credit report. If there are no other issues, your credit score will rise slightly as time passes since your bankruptcy.
However, it is typically quicker and more efficient to obtain a small installment account. This may include a modest unsecured credit card, a secured credit card, an auto loan, or a personal loan. After bankruptcy, it is possible to obtain any of these forms of credit, but the terms may not be favorable. Maintaining an affordable credit line should be your primary concern, as making these installments on time must be your top priority.
Twelve months of consistent payments on any account, with no delinquent invoices in collections, can increase your credit score by at least 20 points. Those twenty points could have a substantial impact on your financial future. You may be able to raise your credit score even further by keeping your balance well below your credit limit and monitoring your debt-to-income ratios, particularly if you still have debt on your credit report (such as student loan debt) that the bankruptcy could not discharge. You should also pay your other debts on time.
Signing up for a credit monitoring service is advisable. You don't want to work hard to improve your credit score only to have identity fraud derail your efforts. A paid service that offers FICO score monitoring will also provide you with positive reinforcement, as you will be able to observe your positive progress. One service, ScoreSense, enables the use of a credit score prediction instrument. This will assist you in determining how certain actions (such as obtaining a second loan) may affect your credit score in the future months. You can then plan accordingly without having to speculate or rely on ambiguous information regarding the various methods the scoring algorithm could be constructed.
Once your credit score begins to rise, you should continue performing the same positive actions. Check your score frequently. This negative credit rating will shortly be a thing of the past.""
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